If you read http://www.48bitlba.com you see 98 supporting 127GB drives without any issue. Your limit is caused by something else so you need to find it.
If it's the BIOS, then check the drive maker for a workaround if the BIOS update doesn't cure it.
I don't know actually why Win98 can't support HD of larger Giga Bytes.
I have got a 40GB HD, of course, I know the Win98 and my MB will never be able to recognize it.
I am trying to format the HD and make 8 partitions.
Each partition gets 5GB.
Do you think if this new formatted HD will be accepted then?