<<< 1394 connection, disabled, firewalled, net adapter 1394 >>>
This is a "Firewire" connection. It wouldn't normally be disabled and would show as "connected" even though it isn't in use. It has no relevance as far as connecting to your Netgear router is concerned.
<<< Local area connection 2, connected firewalled,Intel(R) Pro/1000 CT network connection. >>>
So where is the "Local Area Connection" (number 1), if only the second one is shown? Do you have two network adapters physically installed in the PC?
<<< Secondly, will the Netgear USB 2.0 work on USB 1.0? and if not can I install a USB card on 98SE? >>>
The USB 2.0 adapter should work in a USB 1.1 port although the adapter's nominal speed of 54Mbps will be restricted by the 12Mbps speed supported by USB 1.1
I assume you actually have USB 1.1 (12Mbps) and not USB 1.0 (1.5Mbps)!!
You should be able to install a USB 2.0 card in Windows 98SE - I have one installed in my dual boot 98SE/XP PC and it works OK, but some users have had problems getting USB 2.0 cards to work under 98SE.