I have an IBM PS/2 L40sx bought just days before, it's with 80386 processor so I want to try Windows 95 on it. However the images I downloaded from BA ftp was 1.68MB! The laptop only has one 1.44MB floppy drive. How I can fix that?

You'll need to "overformat" the floppies to DMF size. There are several tools that allow you to do so, but I don't quite know which one to recommend, so try googling a bit.

the 1.64 MB disks you mentioned are in DMF format. They could be written on standard 1.44MB floppy's with software like WinImage.

I did what you're trying to do a few years ago, but I used File Maven 3.5a to transfer the WIN95 folder using a parallel or serial port:
http://www.briggsoft.com/fmdos.htm

You could also use ARJ to compress the WIN95 folder to several 1.440kb archives and then use some floppies to copy them to the hard drive along with the ARJ.EXE. I know it's not the "smartest" way but I like playing around with command line

In case you have enough diskspace (but probably not ) you can try copy'ing the CD version (or just the extracted files) to a folder (i.e. C:\WIN95) and run setup.exe. You can try to copy files over serial-connection (INTERLNK, INTERSVR) or by installing the harddisk into a somewhat more modern system.