OK, for W2K you should use the RU BIOS with v.1.25 HPT366 support.
Then you need to get the W2K driver for the HPT366 in matching 1.25 ver.
Now set the BIOS boot option to CDROM as the 1st boot device & make the CDROM the master on IDE channel-0.
If the HPT366 BIOS loads & detects your 40G drive parameters OK, you should be able to boot from CDROM & install.
If CDROM keeps choking, make a Win98 boot disk & use it to load the CDROM drivers - then run the W2K install. (make sure to get a copy of SMARTDRV.EXE for W98 to cache the drives during the W2K install or it will take forever to run).