Windows 98 was installed on your computer with some kind of Custom configuration, leaving out important components including Audio Compression.
Please go to Add/Remove Programs and click the Windows Setup tab at the top.
I believe it is under the Multimedia tab that you can find Audio Compression. Turn it off and back on and then hit OK. It will ask for your Windows 98 CD and promptly install the necessary components.
Please let us know if this helps you or if you have any further problems.
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