http://www.cloudscape.com/support/onefaq.jsp?faqnum=205
Question Details :

I'm using the Cloudscape ODBC driver on Windows 98 and when I try to add it, I
get the error that the Java VM cannot be started. Running ojinfo.exe yields the
same results saying that the java DLL loaded successfully, but that the Java VM
could not be started. The PATH environment variable contains
C:\Cloudscape_3.5\jre\bin, which is where Cloudscape installed the jre.

Answer:

You need to have the path to the directory that holds jvm.dll in your path
as well, which should be c:\Cloudscape_3.5\jre\bin\classic. The directions
are not that clear, but ODBC uses JNI, which needs to be able to find jvm.dll
in order to start the JVM; it can only find it if the directory that holds it is on
your PATH.