If you have more that 64MB of RAM, make 98 write less often to the swapfile to improve performance. (This hurts performance if your have less than 64MB. See Q223294)
Add the following line to the [386enh] section of system.ini:
ConservativeSwapfileUsage=1
Run regedit, and navigate to hkey_current_user/software/microsoft/windows/currentversion/explorer/menuorder.
Expand either the favorites or start menu subfolders, and select the menu subfolder under that. The right pane should show a value called order , which is 08 00 00 if the registry is appending your new entries.
Right click on order, then delete it. This deletes the stored order for the favorites or start menu shortcuts, which will be rebuilt (in alpha order) on the next reboot.