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Is this an original disk or a burned copy?
There is really no reason why you can't install 98SE over 95. If it's a Full Version 98SE CD, it shouldn't be telling you that you can only upgrade. I've installed both Upgrades and Full Versions and have NEVER had the Full Version say I had to use Upgrade.
It sounds to me like this is a burned copy and has a few files mixed up. I hope I'm wrong though.
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