It didn't work (the system.cb) . I think my problem is i am at the part when the system install the drivers in the background that says something like "98 setup" on the top

The cause for the issue is to be detemined, but the actual effects can maybe be mitigated.

Right now the issues (effects) are that:

1. you cannot boot win "normal" mode (because the system crashes)
   
2. you can boot to safe mode BUT the shell doesn't load (fully), i.e. you get the desktop and Explorer is running BUT you have no Start button/tray
   

Your next attempt could be that of attempting to load an alternate shell (winfile) to see if you can boot in safe mode (and from it do what rloew suggested).

Try following this:

http://www.mombu.com/microsoft/windows-98-general/t-windows-starts-but-no-start-button-desktop-image-only-229791.html

jaclaz

I think the "Shell=Winfile.exe" line must go into system.cb, too, to influence safe mode...

BTW, "CB" means "clean boot", FTW.

I few month ago I successfully installed 98SE on a 2GB SD Card in a card reader according to these instructions

. If I remember correctly the SD Card worked in DOS comp. mode, anyway  windows was very slow. Then I tried to install 98SE on a 8GB Stick. The setup slowed down and seemed to hang. Maybe after two or three hours I cancelled it.