sounds like your HD(or system file data) is on the fritz- your first problem was a "Non-system disk or disk error, replace and strike any key when ready" error, or thereabouts. So you made a system disk (floppy) and boot the computer. a floppy disk boot will NOT contain any GUI elements, and in general would be used to diagnose and fix problems with a windows installation.
after booting with the floppy, try SYS C:, this should at least solve the "non-system disk" error. Of course it appears that your Hard drive is having more problems then that, given the Device initialization failure of the Win98 Filesystem driver....
Also, try fdisk /MBR
good luck to you.