Win98 was/is indeed FAT32.
The CMOS battery might be dead in the Acer machine, and it's "lost" the hard disk parameters. Upon power-up, the machine will default to factory settings. Any settings you save to the bios will hold until power is removed (system shut down).
In the Acer bios, are there two or three choices for the hard disk parameters? (If auto-detecting the disk.)
If so, there will probably be a number (1, 2, etc) next to each "setting". "1" will be the "machines choice" as best for working with that particular disk. "2" & "3" will also work, but "1" is preferred for best disk performance.
Try choosing the "1" settings, save to the bios, and see if it boots. (If this machine came from the factory with this hard disk, "1" is
most likely the proper choice.) NOTE: Changes will be written to the bios, not the disk.
CAVEAT: The disk will probably work with all three choices.
However, if any instablilities are noticed when performing read operations, shut down and try the next disk parameter choice. ("2" etc.) Do not perform any write operations to the disk while any instabilities are evident.
Improper parameters are probably why scandisk gave the results it did. If scandisk "read" the disk, it's probably salvageable.
Once you get error free reads, you can copy the games and files you wanted.
You can also check the disk itself with the manufacturers diagnostics to determine its "health";
Hard Disk Analysis/Setup Tools - Major Manufacturers