Does your defrag consistently hang at the same time, like 15 minutes? It could be your power management kicking in. It could be a setting in your Control Panel or your BIOS. Not sure if defrag.exe runs in Dos, but can you create a Boot Disk from Win98 by going to Start, Settings, Control Panel, Add/Remove Programs, StartUp Disk tab, Create Disk.
I hope this helps.
Regards,
Sun Kim