Hi, I use ZipCentral
http://zipcentral.iscool.net/ for most of my Zip files. It does however seem to have problems with very large zip files [ie. 100Mb plus], but this should be fine for what you want to do. Did I mention it's free?
Hopefully the zip file will contain an install program which will do all the setting up for you. You will need to extract all the files inside the zip to a folder before you can use them.
However if there is not a setup program then you will need to return to Device Manager as Krank described earlier and double-click on your graphics card, click the 'Driver' tab along the top and click 'update driver' then point it towards your folder containing the unzipped files.
You will probably be asked for your Windows98 Cd at some point, and then to re-start. After the re-start assming all went well you should now be able to change the number of colours and your screen size.
Unless you are plannig on playing games, you shouldn't need to update Direct-X. When you install most games if it is required direct-x is usually installed automatically, although this may not be the newest version.
Good luck, let us know how you get on.
No trees were harmed in the construction of this message, however many electrons were terribly inconvenienced.