You might start here:
http://home.satx.rr.com/badour/html/w98_restore.html

...Alan

You can't format the drive to which Windows is installed, then expect to
upgrade.  Formatting erases all the files and directories.

See if this is helpful.

http://home.satx.rr.com/badour/html/upgrade.html

Ben

There are several types of Windows installation media

Many computers come with instalation files in a folder or directory on
the hard drive. These folders and partitions may or may not be hidden
from normal viewing in Windows Explorer. The manufacturer MAY have made
provision in software that would allow the retail customer to back those
files up on removeable media ONCE. The instalation / recovery provisions
on the hard drive could easily be destroyed by ordinary drive formating
or drive partitioning activity. (OEM without media)

Microsoft commonly permits computer manufacturers to reproduce Windows
instalation media with customization for the computer configuration (OEM
with media). The manufacturers agree to assume Microsoft's place
providing customer support for retail cuatomers purchasing those
systems. The individual product keys and end user licenses are tied to
an individual computer and cannot legitimately be used with a newer
computer. This last restriction is sometimes enforced with hardware
configuration verification during the OS installation process.
Manufaturers are required to purchase adhesive Certificates of
Authenticity (COAs) and include the COA with each computer sold. Some
COAs were attached to thin "Getting Started..." manuals, but more recent
ones have to be attached to the computer. Microsoft provides services on
their web site allowing retail customers to determine if their COA is
authentic.

Retail Upgrade packages have provisions in their installation code that
will verify the existance of a qualifying earlier OS. If the qualifying
OS isn't installed on the computer the upgrade will ONLY install if the
operator is able to insert valid installation media for the earlier OS.
If you can't locate the removable installation media you will NOT be
able to install the newer OS! Some earlier OS versions might not be
considered qualifying prior products for the most recent OS versions
(may also apply to application retail upgrades).

Full Retail instalation packages don't care what you had before. As with
the other types ONE and ONLY ONE computer per COA or Full version
package. Full Retail packages are typicaly more expensive than Retail
Upgrade packages, which in turn are typicaly more expensive than OEM
licenses.