I bought a computer that uses Windows 95, and I'm trying to upgrade it to Windows 98. When I enter setup, I get the following message:
"d:/setup is not a valid win32 application."

Any ideas? Your help is much appreciated!

Even though this thread relates to Diablo game, it has some pretty good tips for trying different modes to run the Win 98 update. I'd suggest you try the 2 relating to installing the update in safe mode or after closing all running programs (the one's that run in the background). Use CTRL+ALT+DEL to bring up the task list. End all programs except Explorer and Sys Tray, then try running the update again.

http://www.blizzard.com/support/?id=adt0291p

I tried both ways. When in safe mode, my computer doesn't recognize my CD Drive, even though when it's not in safe mode, it works fine. I think it has something to do with the Networking Configuration, because I bought it from a school district.
When I try to run it after closing all background programs, and the only thing open is "Explorer", it gives me the same message.

Is the update CD Bootable ?
If your system cannot boot from a CD-ROM (can happen on old systems, and I guess this is an old one if sold with Win95...), then you may try to boot from a Windows Boot Floppy which tries to load various CD drivers ... then if the update can be installed in DOS mode, you have a chance.

Tray to install windows 98 under DOS.
But I recommend WINDOWS 95 .

Something more basic, your processor is 16bit or 32bit?