I had the same problem with my system, try booting into safe mode (hit F8 before it starts to load windows) and do this...
http://www.apushardware.com/faqs/kt7faq/faqboot.html
I get a blue screen with a green line at the top after restarting.
Tape detection seems to cause this problem. Removing MSBackup will not solve this problem in itself, and so it is necessary to remove, or preferably rename, the following files.
[C:\windows\inf ]
pnpwfdc.inf
pnpwide.inf
pnpwtape.inf
pnpwppt.inf
[C:\windows\system\iosubsys ]
drvwq117.vxd
drvwppqt.vxd
drvwcdb.vxd
See also "Windows 98 hangs or reboots during startup or at desktop!" below.
Windows 98 or Me hangs or reboots during startup or at desktop!
This again has been reported as being due to a problem with the Seagate device driver files. One user who is a small system builder has reported that renaming drvwppqt.vxd and drvwq117.vxd solves the problem. They experienced the problem on motherboards from seven different manufacturers and found the above solution to be successful.