Your Thinkpad is as old as one of mine!

My X40 came with Win98 so I'm guessing the bios is the same or similar.

Also that your Win98 cd is bootable?

The IBM way would be use an IBM Restore & Recovery cd set - but I guess you don't have that? There is no reason why you can't install 98 without them if you can find the drivers - I could help there as well!

To boot from the cd there are a couple of ways:
1. Press F1 when the first screen comes up at pre-boot - this should take you to the Bios settings and you will be able to select to boot off the CD drive.

2. Press F12 on pre-boot and you should get a list of devices to boot from.

Hope this helps