Yes, backup your MSDOS.SYS.
The following occurred with Win 95 so may be true for Win98:
Sometimes running SYS from a floppy (i.e. SYS C

only installs a tiny MSDOS.SYS (6 or 9 bytes). Booting from the hard drive will then only take you to a DOS prompt. If you look at the size of the MSDOS.SYS installed as part of Win98 (i.e. before SYSing) it's 1.684 bytes (on mine, at any rate).
Incidentally, if you replace the version of MSDOS.SYS that's on your windows boot floppy with the one on your version of Win98 your floppy should take you straight to a GUI. It's of little merit - just a point of interest. Though I suppose somebody who doesn't know DOS might like to get into their GUI to do whatever it is people do in such places. Also, your MSDOS.SYS can then easily be copied over from the floppy to replace the one SYS put in place.
You would think that as you have the "full" MSDOS.SYS on your floppy running SYS from the floppy would put the full version on the W9x system. No such luck.
I believe SYS does it's job better (re replacing MSDOS.SYS) when you run it on a W9x that's part of a dual boot. Though of course it replaces the boot sector (as seems to be the point of this thread) and banishes your dual boot for ever more. (The Recovery Console FIXBOOT will replace the Win9x boot sector with a W2k one which, however, will not let you into W9x, only W2k. Presumably because it knows nothing about bootsect.dos.) Anyway, coming back to my point, the small MSDOS.SYS only seems to get transferred on a Win9x single boot system.
As I said at the beginning, I've only seen this happen with Win95. (And it may have been the original Win95a). Haven't experimented along these lines with later versions of Win95 or Win98.
By the way, if editing the BOOT.INI to have no reference to windows 2k (along the lines of the last post) you might as well have the timeout at zero. I think this means it will just go straight into W98.
If, on the other hand, removing the W2k altogether you might as well delete boot.ini, ntdetect.com, ntldr and ntbootsect.dos from C:
A mistake that many people (well, maybe just me) make is they think deleting the Win2k partition and the boot files from C: is sufficient. They forget that they have still got a Win2k boot sector on C:. SYS replaces it. Anyway, this has been dealt with very well by the earlier posts.
Dermot