This isn't a problem, everything seems to be working fine, but for some apps (specifically Works 3.0 for Dos in this case) Windows 98 launches but only after the message in the subject is displayed for a few seconds, and it launches in a different DOS window.
Anyone know why? or what it's doing? Is it a hard-coded Works compatibility setting?
It took me a while to figure out, but my understanding is that you're starting Works from a DOS prompt, and it displays that text in the DOS prompt before starting Works in a different window. I think I confirmed my understanding because in Windows 98 SE, I renamed something else to WORKS.EXE and I saw the same thing you did.
In my Windows 98 SE, WINDOWS\INF\APPS.INF includes (manually transcribed, so might have typos):
[WORKS.EXE]...Enable=lml,uus...
APPS.INF is described in the Windows 98 Resource Kit but it doesn't document that "uus" flag. Knowldge Base article Q130971 says "uus" means "Run program in separate session" which sounds like it probably explains the different DOS window thing. That KB article is for Windows 95, but I assume the flag would still mean the same thing in Windows 98 because I searched an old TechNet CD and couldn't find any Windows 98-specific information about it.
