hit F8  while booting and select   safe mode

defrag should work from there

Have a look here, by MS MVP Ron Badour:
http://home.satx.rr.com/badour/html/defrag.html
and
http://home.satx.rr.com/badour/html/scandisk.html

Hmm, good suggestions, and the likely answers.
However, if I may ask for clarification, when you say 100% is available, do
you mean there is nothing on the drive, or that when looking at the drive in
Explorer it shows nothing? Or is this in Properties, showing you the
available space? If so, what does it show for the size, and how much has
been used?
Also, is this OS 98 or 98SE?

At 2 gig [a small drive compared to the space 9X eventually consumes, such
as mine which the Windows directory is at 1.23 gig] and 9 years ago: it MAY
have been compressed. Which would mean essentially you have two partitions.
If it was drive spaced or double spaced, this may be causing you
difficulties [host verses actual]. This would also effect size shown,
available space, speed and length of defrag time.

You also haven't stated what processor speed, maker and model of computer.
Depending upon the manufacturer, you may have another hidden partition in
which the manufacturer has placed recovery files.