You may have a problem with your system reading from the CD ROM. It's not uncommon and there are a few ways around it.
I suggest you try the following:
1. Browse the Windows 98 SE CD.
2. Find the folder called Win98.
3. Right click on it, then left click on Copy.
4. Now open up My Computer, right click on your C: drive icon, then left click on Paste.
This will copy the entire Win98 folder to your hard drive. It will take a little while since it is around 173mb in size, but it contains all the Windows setup files. When it has finished copying remove the CD ROM from the drive.
5. Go back to the Control Panel and add the elements of Windows you want to install to your list.
Here comes the clever part.
When you start the installation of the missing Windows elements you will be prompted for your Windows CD ROM. Just click OK to proceed and you'll get a message to the effect that the files/CD could not be found. Use the Browse button to browse to the Win98 folder you copied to your hard drive and let the install proceed when you tell it to look there for the setup files.
I always copy the Windows setup files to hard drive. If you ever get a device like certain scanners or printers that require some additional Windows files to install and configure them you can do it all without having to look for your Windows CD ROM.
Give it a go. It may help.