MS FAQ (Start Menu and Favorites Menu Not Listed in Alphabetical Order)
One of the most common and bothersome problem's with Win98 is it's inability to sort the START Menu correctly.  Here is an MS FAQ on how to fix that:
SYMPTOMS
When you view the Start menu and Favorites menu, the shortcuts and folders may not be in alphabetical order and new shortcuts that you create may be added to the bottom of the menu.
CAUSE
This behavior can occur when you rearrange the shortcuts and folders on the Start menu or Favorites menu manually, or when you install a new program.
The Start Menu
To restore the default sort order:
Use Registry Editor, delete the binary value "Order" from the following key:
HKEY_CURRENT_USER\Software\ Microsoft\Windows\CurrentVersion\ Explorer\MenuOrder\Start Menu\Menu

source- windowglore.com