What is vmm32.vxd and why doesn't it like me?

I'm trying to re-install Win98 on a friends computer, this shouldn't be a problem give the insane number of times I've had to reinstall a Windows OS.
However I've hit a snag neither myself nor any my friends have seen:

Windows protection error. You need to restart your computer.
C:\WINDOWS\system\vmm32.vxd: Missing/unable to load.

It happens after the inital load of WIN98 (when it ask you for all the setup options, the password, and the detecting devices). I get a splash screen and then everything goes black and I get this message.
I've tried stripping everything out of the system I can, I've tried using another install CD, swapped out the RAM for a stick I know works.

Any ideas out there about what cold be going wrong?

The system is a Dell Dimension xps r4500
It looks like it has the following:

Creative CDRW 8x4x32
16 GB Maxtor HHD
A Vidcard I can only id as a "STD nVIDIA TNT"
450 pII
It came will 128MB SD PC100 Ram, I put in a 64 PC100 hoping the RAM was causing the error

Thanks for any help!