Which Win98 do you have? Check under the control panel, Device Manager to make sure your USB device is being detected.
Not positive, but does the USB device need to be formatted?
Does the device show up at all under Explorer? if yes, right click on it, and select properties, if there is a format option, maybe you should format it, also check the filesize of the device, to make sure it is showing up correctly, it should display 256megs (or whatever capacity it is) available if it does.
Also, make certain that the files your dragging n dropping are mp3's and not some other format, such as wma, if it does not support wma.
I found this link, different company, looks to be the same exact products, they have some FAQ's, a user guide, which you need to download and save, and open in Adobe Acrobat, but it might help you out some also.
http://voigo.com/service.htm