the extensive hard-disk activity (if this is indeed the case, it is called 'Disk Thrashing') suggests one of two things - 1) There is too much information on the Hard Drive and not enough space left for the Page File (virtual memory), or 2) the Hard Drive itself has become corrupt.
Investigate booting with Bart's PE (downloadable) - this will allow you to diagnose the errant drive. If there is less than 1.5GB left on it, delete some files. If you can't read it, it's dead. If you can read it, and there's plenty of space left, try running fdisk with the "/mbr" switch to fix the boot sector. This last bit is on the Win 98 boot floppy.