Win98SE won't boot (or safe boot)

Hello,

I recently experienced a major problem with my Win98SE machine.  I was doing some research online on Parental Control software at the major VirusScan sites (Symantec and McAfee) and I saw a link for a free, quick virus scan of my computer.  Now, I always meant to install Virus Scan software and had always recommended it to friends, but I never installed it on my PC.  I did the scan and found that I was infected with Sobig.e.  Doh!  Well, I subscribed to McAfee VirusScan online and downloaded the software and cleaned the system.  I then shutdown the PC and went away for the weekend.  I came back and was unable to fully boot the PC.  It would run the Win98 executable and get me to the login screen.  Once I logged in, the computer would hang and never complete the boot sequence.  I tried booting up in safe mode but it did the same thing.  I was able to boot to a DOS prompt and I saw that my files were intact.  

My questions would be:
1) With the limited info provided, would you point a finger at McAfee?  I remember VirusScan software installations being a problem back when 98 was the latest OS...
2) What should the recover plan be, assuming no extra purchases and I have the original CD's laying around?  Is it wise to reinstall Windows 98SE via the CD and hope that my data doesn't get lost?
3) Once I get it back up and running on Win98SE, what is the smart thing to do as far as preparing for a disaster like this in the future?

One other note.   I did go to the store and purchase a new disk drive.  I had a copy of XP Pro laying around and I installed it on the new disk.  I installed the 98SE disk as a slave and am currently recovering my old data.  In the end, though, I would like to play around with the "suggested" Win98SE recovery method so I can learn how to do things the "right" way.

Thanks in advance for your help.