I have run into this problem many many times.
The hard drive is of good size, so that works in your favour. The absolute easiest way to do this is also the one you have to be the most confident in doing. Buy a IDE 2.5 Inch 44 pin to 3.5 Inch 40 pin convertor.
Something like this, runs 12 bucks
*** BE CAREFUL **
REMOVE LAPTOPS CELL
Make a directory on Your desktops C Drive and copy your Win98 CD into this folder.
Power down your Desktop PC.
Your Desktop should have 2 IDE Ribbon cables, one that connects to the Hard Drive, and one that connects to the CDROM. If this is the case, remove the power and the IDE cable from the CDROM Drive.
If you only have 1 Ribbon cable, that connects to both the Hard Drive and the CDROM, then you will need to make the laptops hard drive a slave. This is simply done by looking for the jumper, which is usually located on the same edge as the IDE connection strip. There will be some markings that are labeled MAS, SLA, CSL and they will represent the way the plastic jumper needs to be positioned. It should be set to MAS (master) and you will need to make it SLA(Slave). Remember its location so you can return it back before putting it back in the laptop. Remember, you only need to do this if you only have 1 IDE cable in your desktop, which is unlikely.
Once you have swapped the CDROM, with your Laptops Hard Drive, make sure you have connected power and the IDE ribbon cable.
Power up your desktop, and enter the Bios. Most computers you press the DEL key. Some Compaqs, Dell, use F11.
Once in the Bios, look around for the Hard Drive setting. Most Bios have an auto search feature that will automatically locate new hard drives and CDROMS.
Your bios should now recognise a nice 4gb Hard drive as the Seconmdary Primary, or in the 1 ribbon scenario, Primary slave.
Save the settings and exit the bios.
Once windows has booted on the desktop pc, your CD rom letter will now be the laptop hard drive. You may choose to format it using Fat32 at this time.
Move the directory you created with the Windows98 CD onto the Laptops drive. You may want to double check the sizes of the directories to make sure they match. Once you are confident that the data is now on the Laptops drive, power your Desktop down.
Remove the Laptop drive, and return the Jumpers to the original state, if you changed them. Return your CDROM into the desktop.
If you have a Windows 95 or 98 Bootdisk find it now
If you dont, you can get one from
here
Replace the Laptop drive into the laptop, making sure the jumper settings are the same as they were before, and instert the boot disk. It should boot and load some basic files. Once booted, change to the new Windows directory with the CD contents on.
There is a win98 folder within this, run setup.exe and install windows 98.
It sounds very complicated but it probably took just as long for me to type this as you could probably do it lol.
Summary.
Remove laptop Hard Drive
Copy Win98 CD to a directory, something like WIN98CD
Remove CD Rom from Desktop
Check the Jumper configuration on the laptops hard drive
Copy WIN98CD onto Laptops Hard drive
Install Drive back into Laptop
Boot, and Install from the WIN98CD
Good luck.