I do this fairly frequently. Once a month or so. There are a few things I do first to make sure I don't waste time defragging unnecessary files.

First is to delete the Internet Explorer Temporary Files and History.

Second is to delete TMP and BAK files.

Third is delete any files and directories in the \TEMP and \WINDOWS\TEMP directories

Defragment without the swapfile.

Windows98 has a built-in utility called Disk Cleanup. You can run it from either the Start / Programs / Accessories / System Tools / Disk Cleanup or directly run CLEANMGR.EXE