Hey-ho here!
Just to close this topic completely - the machine is up and running under Windows 98SE. Though I still to do a lot - drivers, software, even mouse is not yet properly connected - I think most of the problems in regards with make it work are behind.
To sum it up
PSU
I spent way a lot of time trying different jumpers combinations, plugging in and out graphic card, sound card and memory stick just to get into BIOS. Apparently no-name 300W power supply unit is not enough for a P III setup.
I ended up with 350W PSU named LC350H. And so far it works.
Floppy
After I was able to see the energy star logo and got into BIOS I got “floppy disk(s) fail (40)” error. A couple of tries with different cable connection - but it didn’t even blink with led.
Long story short - never underestimate chance for even a straightforward component to fail. I found another floppy and that one started up perfectly.
Windows 98 setup and cd-rom
I was thinking that I’m almost there. I inserted Win98 floppy disk and it showed me an option to setup OS from CD.
Right after it became weird:
- if I follow the path with floppy - it installs a couple of drivers, locates CD-Rom at D:/ and right after tells me that there is “No Windows 98 setup files found on a CD”. When I try to navigate to D:/ and run “dir”, for examples - it doesn’t even blink CD led and gives error CDR101: not ready reading drive D. Cd-rom is meanwhile perfectly visible in BIOS.
- if I set Cd as a primary boot device - it lights up the led and runs disk for a while. After this it falls back to floppy.
I was confused by the fact CD is “partially” working. And I had so many such weird theories. Of course I tried all possible combinations with primary / secondary ide and master / slave positions.
Long story short: it was IDE cable. Which was brand new from Amazon, by the way.
After I changed cable all went smoothly.
At the end I installed windows98 and now ready to close this chapter.
Thanks everyone for help.