Point taken about the posting protocol.

More information...
I'm told that I must limit RAM to below 1GB during Windows 9x Setup.
So, I put the HDD in an old pc with 512MB of RAM and installed Windows
98SE (clean install) successfully.

I then put the drive back in the new pc with 2GB RAM. I set
MaxFileCache=512000 and MaxPhysPage=30000 in system.ini and rebooted.

I pressed F8 on boot up and selected "4. step by step confirmation". I
answered "N" to config.sys and autoexec.bat and "Y" to everything else,
including himem.sys, dblbuff.sys and ifshlp.sys. (If I answered "N" to
these, I got the error message 'himem.sys not loaded')

When I got to the line msmouse.vxd and presses Enter, the system just
hangs (blinking cursor, no activity). Then had to power down manually
(Ctrl Alt Del had no effect).

I had a look at bootlog.txt. All drivers listed had loaded
successfully. The last 7 lines of bootlog.txt are
[000BA12D] Initing hsflop.pdr
[000BA130] Init success hsflop.pdr
[000BA130] Initing esdi_506.pdr
[000BA136] Init success esdi_506.pdr
[000BA137] Initing esdi_506.pdr
[000BA13C] Init success esdi_506.pdr
[000BA13D] Initing esdi_506.pdr

Does this indicate a memory problem?