The system starts in Safe Mode because Safe Mode eliminates a problem.

Safe Mode does the following:
(a)  bypasses config.sys and autoexec.bat
(b)  prevents programs from starting automatically (from win.ini
    or the startup folder)
(c)  uses standard VGA video
(d)  prevents a network from being started
(e)  disables protected mode device drivers (those listed in
    Device Manager)
(f)  bypasses the [boot] and [386Enh] sections of system.ini
For more details, see document 122051 in the Microsoft KnowledgeBase.

You can try tests from the list below to pin down the cause of the
problem. For more elaborate instructions, see document 156126 in the
KnowledgeBase, which explains how to do troubleshooting in Safe Mode.

With Windows 98, you can use MSConfig to help you run the tests below.
With Windows 95, you can use Startup Control Panel. Startup Control
Panel is similar to the Msconfig utility that ships in Windows 98. It
can make troubleshooting easier by removing and restoring items from
the Windows startup. You can get Startup Control Panel as freeware
from:

http://home.ptd.net/~don5408/toolbox/startupcpl/

Startup Cop can also disable items loading at Windows startup and it
is freeware. You can download Startup Cop from:

http://www.zdnet.com/downloads/stories/info/0,,77594,.html

1. Change the video driver to Microsoft's Standard Display Adapter
(VGA). Restart Windows and test.

2. Rename the Config.sys and Autoexec.bat to Config.sss and
Autoexec.bbb, or edit them so that the only things loading are
absolutely necessary for the computer to run.  The latter items might
be a SCSI driver for the harddrive, or disk management software for an
EIDE drive.  Deactivate EVERYTHING else by putting REM in front of
that line. Reboot the computer and test.

3. Remove EVERYTHING from the Start Menu/Startup folder by dragging
their icons onto the desktop. Also disable or uninstall all utilities
that are running TSR (such as Norton Navigator, SoftRam or Macafee
AV). Restart Windows and test.

4. Rename the Win.ini and System.ini to Win.iii and System.iii. Then
make a copy of System.cb and name it System.ini.  Do not rename
System.cb itself. Edit the new System.ini as follows: Add
  device=*vmd
to the [386Enh] section, and add
  drivers=mmsystem.dll
  mouse.drv=mouse.drv
to the [boot] section. Restart Windows. You probably will have no
mouse so you'll have to use keystrokes to do the following. Go into
Device Manager and select the mouse (which will have a yellow
exclamation point). Click "Remove." Again, restart Windows. Windows
should find the mouse and install software for it. Test.

5. With Windows 98, run the System File Checker. Go to Start/Run and
enter “sfc”.

6. Rename the current Windows folder (directory). Then install
Win95/98 to a new, empty folder. Test. If problem does not occur, it
was caused by something in the old installation. I recommend that you
keep this new installation and reinstall your Windows applications.

When you reinstall applications, install Windows applications that
were written for Win95/98 or WinNT but do not install older
applications that were written for Windows 3.x. Install only one
application at a time and test the system thoroughly before installing
another application. Before you install and application, make a system
snapshot with a program such as ConfigSafe; this will allow you to
revert to the previous situation if (when) you install an application
that causes trouble. With Win98, it is also possible to run "ScanReg
/Backup" before you install an application, which allows you to
restore the Registry if (when) you install an application that causes
trouble. However, it is safer to make a complete system backup and
recovery with ConfigSafe or a similar product.

The following articles explain how to install into a new folder:

How to Reinstall Windows 95 to a New Folder [142096]
http://support.microsoft.com/support/kb/articles/142/0/96.asp

How to Install Windows 98 to a New Folder [193902]
http://support.microsoft.com/support/kb/articles/193/9/02.asp

Information about reinstalling is also on www.windowsreinstall.com.

Bill Starbuck (MVP)