"Invalid System Disk replace and hit any key to continue"

dont see the file at all in the c: drive.
tried the command anyway and it did not find the file

Do you see any files called msdos.bak or something similar?  Or perhaps you can find another Win98 machine to copy the file from to your computer...

Here's an MS article about the contents of MSDOS.SYS:

http://support.microsoft.com/default.aspx?scid=kb;EN-US;118579

Also, I forgot that you have to turn off the System attribute in order to see it and read it:

attrib -h -r -s msdos.sys

nothing even close!
is it possible that is had win2k?

Here's another very good page about MSDOS.SYS.  You can even see a screen copy of it:

http://www.mdgx.com/msdos.htm

Well, with Win2k, you should have some hidden files called ntdetect.com, ntldr, and boot.ini on the root folder...

am i supposed to build the file from scratch.
there has to be a better way?
why would the file disappear?

if they are hidden, should i see them when i do a dir?

No, you have to unhide them in order to see them.  I think you should be able to copy and paste the sample msdos.sys file from the  last link I gave you.  Or, copy it from another Win98 machine.  

Why would it disappear?  One possible reason is that the directory info on the hard disk could have gotten corrupted, and so the location of the file would disappear...  That suggests another thing to try:  run scandisk.

it seems as if there is an msods.sys file on c:
when i try:
attrib -h -r msdos.sys

i get

not resetting system file C:\MSDOS.SYS

You have to turn off the System attribute too.  Type:

attrib -h -r  -s msdos.sys

you are correct. was missing -s param.
the only setting in the file is
;sys

should i cut/paste from the site above?

I think you should try it, although the best alternative would be to get another copy from another Win98 system.

copied file from another win98 machine i am repairing.
getting all kinds of error messages.
they were all related to the path.
 i corrected and now am booting up.

Thanks to EE!