Windows 98SE is just Windows 98 with all the updates etc.
At least, that's what I've been told, please someone correct me if I'm wrong.
Be aware that if you are on the internet with Windows 98 you will be vulnerable, as Microsoft will not be releasing any more security patches for it.
What happens when you try to load 98SE?
You say it tells you that you need the upgrade, but what actually happens?