I believe you have a single hardisk with single partition (fat32 or 16?) which W98 resides.

In this case you need to resize that partition first and then create a new partition from the freespace(leftover after resize).

You need at least 3G of free space.You need to create 2 partition on this free space:
1)Linux Swap partition (128 - 500 MB )
2)Linux ext2/ext3 partition ( the rest of free space )

All above can be achieve using partition manager ex: partition magic.

After everything is done, proceed with knoppix cd hdd installation(knoppix-installer).