Setup problem with SCSI drive

I have moved my daughter's peripherals from a Pentium 200 motherboard to a PIII 733 running on an Asus CUSL2 (Intel 815). The hard drives were 2 9GB SCSI drives (Atlas V and IBM 9LZX or 18LZX)running off an Adaptec 29160N. Win 98SE was installed. Since part of her speed problem (other than the processor) was having totally filled up one drive, I plan to add (or replace the drives with) a later 36GB IBM 36ZX drive.

In the initial try at booting from the original drives, I managed to screw up the directories/files (I think a bad old SCSI LVD cable may have been part of the problem). Anyway, I have detached the old drives from the SCSI bus and attached only the newer, bigger drive, intending to do a clean install and then copy old data off the old drives.

After creating an emergency boot disk, I successfully FDISKed the new drive, creating a single FAT32 partition, and then formatted. But each time I try to run setup from the Win 98SE update CD, SCANDISK stops the operation saying that the first entry/cluster of my FAT table is bad/cannot be read.

I have re low-level formatted the drive twice with the controller's SCSI utility and run the Media verification utility twice (checks all sectors and remaps bad ones). The drive just came from IBM, as a refurbished drive in replacement of the bad one I originally had. The controller has no problem seeing the drive and testing it. I am inclined to believe there is no hardware problem, only a software one.

The MS Knowledge Base doesn't address this situation. I suspect there is something to do with scandisk on the Win98SE CD and either the > 32GB drive, or something else.

I've spent a day and a half trying to get setup to run past the scandisk error. Suggestions much appreciated. Based on other posts on similar (but not exactly this) problem, I know you guyz (and galz?) are good.