Windows 98 problems

Hello All,
I have a "major" problem with my PC. Here goes...I got a HP Pavilion x1963. I'm repairing the PC for a good friend of mine. Running Windows 98 os.

At first..all that came up was the HP "blue" screen. I reset the battery (resetting the BIO's).
Now it comes up with a "black screen" showing all the "Ram"..esc.

Now comes a "menu" that says......

Microsoft CD Startup Menu

1. Boot from Hard Drive
2. Boot from CD ROM

If I chose #1 (from HD)...nothing happens. Just a black screen.
If I chose #2 (CD-ROM) I go through all the options....getting to setting up Windows 98.

I chose "install" and it says I don't have enough HD space. I have a 30 Gig HD.
I thought about "F-disk" the system...I can even do that !
I even try a "floppy" bootdisk....no luck.

I am running out of options here..please he me !!!