I guess this is because of missing video codecs.
XP has a few built-in and most recent codecs support XP/Vista/2k
Win98 probably doesnt have any codecs apart from mpeg and some codecs don't work on Win98.
Divx 7 only works on XP and above, for example. You could look for alternative MPEG4 codecs but you're likely to run into weird problems.
You might wanna try something like GOM player:
http://www.gomlab.com/eng/
It has built-in codecs and supports Win98 as well.