I'm not so sure .... if the hdd was failing ... i'd expect it to fail while you were copying files during installing ... not after you'd installed .... during configuration
(the every 4-5 years tale is an example of the cr*p some fixer types use to justify charging �70 for a 5 minute job (an 80Gb hdd cost �30 retail!) - (sorry nutty ... no reflection on you) I have 8 machines that are 10 years old - used almost every day by lunatic trainees ... never lost a disc yet)
sounds more as if something else is refusing to be configured.
you can easily prove the point ....
go here
http://bootdisk.com/bootdisk.htm
and download a standard 98se bootdisc use it and when you get to the command prompt flashing cursor
.... type chkdsk /f
and go get a cup of tea
then fo3's idea is sound ... if you need to recover files ... a linux bootdisc will give you an easy method of recovering files ... and testing the machine's hardware.
make sure that you test the sound controller (which contains a few different devices and is where I'm putting my money!)... if it's a separate card ... you could try removing it and re-booting before you do anything else
then back to the 98 bootdisc and this time at the prompt type format c: /s
and go get another cup of tea