You can use the XP disk like ek said, however the reason why you cannot format drive C: with your Win98 boot disk is because you have a NTFS partition that you are trying to format. When you use the 98 boot disk go into "fdisk". Then you have to delete the NTFS partition. You will have to select Delete "Non-DOS" parition. The boot disk will then display the NTFS partition. Then you have to create a primary partition. After you create the FAT32 partition, you have to reboot and then you will be able to use the "format c: /s" command.
-Mike