The problem is going to be with the USB drivers that windows 98se uses if I had to guess. Windows 98se is able to handle USB, but that's about it - you have to have the right drivers for the controller, and windows doesn't have a very good set of them available. Several motherboard manufacturers sent out drivers with their boards that did not work well, if at all. You may want to check for the newest USB drivers for the specific motherboard/chipset combination in use from the manufacturer's website (these are usually seperate from other drivers or are combined in a 4-in-1 type driver (for ALI chipsets I believe.)) Then check the BIOS settings for the USB - if it has a USB 1.1, legacy, or something of the like compatibility mode, turn it on - some USB 2 setups simply don't work at all even though they are there.
That's about all that I can think of off the top of my head...