"Feature / Known Issue"... (You asked for that one!!! )

I have seen this happen before. Basically you need to either overwrite or rename the windows directory (c:\windows) instead of using the 2000 default (c:\winnt). Personally, I prefer to wipe the system completely. Windows 2000 and 98 are different enough that it might be best to avoid problems.

If the system is otherwise functional, you can always deactivate the "dual boot" aspect by editing the hidden c:\boot.ini file. A little wasteful of disk, but acceptable depending on the situation.