Is your pc set to boot from USB ?
I used the HP boor disk utility and it worked fine. The way i did it i downloaded the windows 98 bootdisk OEM from
http://www.bootdisk.com/bootdisk.htm and then extracted it with winrar. I then downloaded winimage and used it to extract the files out of the IMA file and got the HP usb program to use those files to make the stick bootable.
EDIT: When you extract boot98.exe with winrar it will give you an error but just ignore it.