Hi,
You're system specs should allow you to upgrade.
Are you running Windows setup from within Win95 or from the Startup Disk?
If from within Win95, try installing from a Win98 Startup Disk. If you don't have one go to
www.bootdisk.com to get one. Boot off the Startup disk and select "with cdrom support" from the Boot Menu. Take note as to what drive letter was assigned to your cdrom drive and type X: <ENTER> at the A: prompt (replace the X with the driver letter assigned to your cdrom drive). Then type 'cd win98' <ENTER> (no quotes), then type setup <ENTER>