I replaced a disk which has windows 95 on it and which is badly
infected with spyware which I could no remove, with a clean hard disk.
On this new disk, which I made to be a master disk, I installed
windows 98 and Norton Internet Security 2004. If I change the infected
disk from master to slave and return it to the computer will Norton
Internet security clean it up or will the spyware erase or damage
Internet Security, or will neither happen?

If you put the original hard drive in as a slave and can get it to
come up with its own drive letter you can at least start to clean it. 
Norton Antivirus can scan it for viruses.  Some spyware will show up
as a trojan in Norton.  I would also install a program designed for
cleaning spyware.  I primarily use Ad-aware.  You can download the
personal edition from:
http://www.download.com/3000-2144-10045910.html?part=69274&subj=dlpage&tag=button

If you run this against that hard drive it will clean up most of the
files.  What it won't be able to do is clean up the registry.  That
can only be done when windows is loaded on that hard drive.  There
really isn't a way to get it completely clean with booting up the
infected instance of Windows.

It shouldn't damage the new version of windows as long as you don't
open one of the infected for bad files off of the old drive.  If all
you are after is to pull some files or something off of the original
drive this will work fine for you and you won't infect the new Windows
(as long as you're careful or course).

Let me know if this answers your question.

Thanks!

http://www.safer-networking.org/en/download/index.html

Download "spybot" from this link.  Install it.  Follow the directions.
 It will fix your problem.

spyare runs off the system that it is booting into. a dormant
operating system will not be called upon on the boot sequence. it will
also not be called upon to load dll's, dat and cab files for IE.
additionally, the registry is totally dormant.

unless there is a stimulus to launch the junk files on the dormant OS,
you will not get reinfected. I suggest choosing what files you need on
the slave hard drive and moving them to the master hard drive (your
current OS) and then format the old hard drive. That will remove
anything potentially lethal.

In answer to your question... unless the dormant file is called upon
by the current OS, it will not get to your system. good move with the
NIS2k4.