1. I am wrong, _this_ goldbox installation seems haven't tuning procedure in START.EXE.
Ok, then you need this POOL.CFG really. But POOL.BAT creates it for you anyway.
2. Your error is not CFG-related. In that case you would get "Insert startup disk" error. "Overlay" error relate to file GAME.OVR. Do you have it?
3. But for "cannot create file" it seems not game-related but system-related error. Can you possibly have some file-protecting in place? "Read-only" flags? Antiviruses? Something? If it was Windows Vista and up, I would suspect directory placement, as system disc (that is usually C) is protected from "extra" files/dirs by default, but for Win98 it must be not the issue...