I have jailbroken 5 phones using Windows 98 and not bothering with compatibility settings. Put your phone in airplane mode, exit all iTunes apps via control+alt+del, put blackra1n on your C: drive, make sure you're phone isn't locked and keep trying. The fewest amount of times it took it to work is 3 (once), and the most was 8.
When it sticks in "running" mode (after 30 seconds of that, it's not gonna happen), exit blackra1n, hard reboot your iPhone and do it again. It WILL work. GeoHot, himself, said that it took 6 tries to jailbreak his friend's 3G. I do the above steps every time and it works EVERY time.
Also- Rock is AWESOME... and I'm gonna jump on the anti-Icy bandwagon. Don't install it.