See if these help:
Error Message: VFAT Device Initialization Failed
http://support.microsoft.com/default.aspx?scid=kb;en-us;139063&Product=w98
VFAT Initialization Error Message Installing Windows 98
http://support.microsoft.com/default.aspx?scid=kb;en-us;190110&Product=w98

Signature
Brian A.
Conflicts start where information lacks.
http://www.dts-l.org/goodpost.htm
>I get a message at start up
> A device or resource required by VFAT is not present or is
> unavailable. VFAT cannot continure loading. Systen halted.