Are you sure it's 3 gig and not 2? Sounds like you formatted the drive using just plain FAT, also called FAT16. That file system is limited to 2GB partitions. In Win98, there is a "Drive Converter" under Start->Programs->System Tools that can take this partition and make it FAT32. Also, make sure your BIOS supports the large hard drive. Older systems usually require the BIOS to be flashed to a newer revision to see larger partitions.
I recommend starting over. Fdisk the drive and reformat in FAT32...