So if you've been using it like this for the past 6 years, why now? what prompted you to try to "resolve" this?
Also, the only real way to resolve this problem is to reinstall windows from scratch. At least ,that's All I can recommend myself, since I haven't a bloody clue as to the state of the system or what has been done to set it in this configuration. Even with your vague recollection of what he told you 6 years ago which includes such heady examples as "I saw the files on the list".
In any case, to my understanding Windows 98 is fairly similar to windows 3.1, that is, you could install multiple in installations at the dos prompt. in order to "Boot" into the respective "version" you change to the directory ("cd windows" or "cd windows1" in your case) and use the optimistically named command "win". Of course if as you say you simply copied/renamed a folder and you try to "boot" in this fashion to the copy it will fail because as far as it's concerned it's still in the old folder and will start from there.