Get Partition Magic - it'll make your task much easier.
Win98 is going to have to be on a partition before Win2k, and the new partition will have to be less than 8 gigs. My guess is that your Win2k is more than 8 gigs which is why you can't install Win98.
Be careful doing this! Your master boot record is in the front of your hard drive, and if you're not sure of what you're doing, you'll erase it and find you can't bootup because your MBR has been deleted.
BTW, since you're creating a second primary partition, both will be listed as C drives. Only one can be active at a time (the one you're booting up with) while the other will be listed as "hidden."
I strongly urge you to get Partition Magic and let the program do this for you.