As ThunderZ comments, getting a USB Mass Storage Device to operate using Windows 98FE is very flakey, and is much improved, but not always 100% with 98SE.
Unless you already have a suitable generic Mass Storage driver operating on the Windows 98 systems, you will need to find one, or an external drive or enclosure that the manufacturer provides a Win98 driver for.
120GB would be the safest option, as it will automatically avoid the 48-bit LBA issues involved in going over 137GB (128GiB).
There are two potential problems I'm aware of with 48-bit LBA in a USB drive. It is not the same limitation as using an internal IDE 48-bit LBA drive, which involves the IDE driver, not the USB storage driver.
The first relates to the Win98 drive utilities. If you need to try using a drive over 137GB capacity, do not use any Win98 drive maintenance utilities on the drive, eg defrag, as they will corrupt large partitions. It may be possible that they can be safely used with multiple partitions <128GiB, but I can't be sure. If I recall correctly, Windows ME utilities can be substituted. But if the drive is also used on XP systems, they can be used for any drive maintenance.
The second is unpredictable, depending on the command set of the specific hard drive, and occurs if the drive does not support addressing sector 268435455 in 28-bit LBA mode. Svend Olaf Mikkelsen offers a utility called GB32 which identifies large drive issues including this one: http://www.partitionsupport.com/utilities.htm
As I understand it, in principle a USB drive should be feasible up to 2TB, but Win98 without specially developed patches cannot utilise the newer hard drives with 4K sectors.
Edited by Platypus, 20 October 2010 - 09:17 AM.