What I have figured out is that as long as I do not allow windows to install the driver for Intel "82371AB/EB PCI Bus Master IDE Controller" the system will boot. If I allow it to install this driver, it will no longer boot. Every time I boot though before it loads the desktop it detencts this hardware and wants me to install the driver. Absent this driver I have no network, no usb, no video card, no sound card, no CD drive, etc. Basically an inoperable system.
Seems to be an issue with VMWare not supporting windows 98se, but others say that they have gotten it to run so I don't know what I am missing. Something in the VM configuration perhaps?