You should be able to dual boot with Windows 98 on the boot disk and Windows 2000 on the second disk. Windows 2000 must be able to install its system files onto the boot drive. This includes BOOT.INI, NTDETECT.COM, NTLDR, and so forth. It must also make a change to the Partition Boot Sector to point at the new secondary bootstrap loader.
I would start looking for anything unusual about this boot drive. Is it formatted FAT32? This should not be a problem for Windows 2000, but is the drive itself larger than about 8 GB? If so, are you running any special BIOS settings or is there a jumper setting on the drive to set special CHS translation? Are you loading any special translation drivers such as an On-Track driver as part of the Win98 boot? I'd also do a virus scan, just to make sure you don't have something odd going on in the boot sector.
If everything looks normal and the drive is less than 8 GB, then you might try imaging the drive to save a good backup then boot to DOS and reformat the drive. This will refresh the FAT. Then try installing Windows 2000 on the second drive. If that works, then you know you have an issue with the formatting on the boot drive.
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