OK this is what you do...
Format your HDD with Win 98 SE using FDisk.. if possible make sure that you format using FAT32. If not, then you can check if FAT 32 down below.
Install Win 98 SE as per normal. install it completely including restarts.
restart system and go to Start Menu - programs - accessories - system tools - drive converter and make sure drive is in FAT32, if not convert drive to FAT32 or you will not be able to install XP.
Next put in your XP CD, use XP's partition manager and create a new partition (roughly 50 to 60 % of total HDD space) and let XP format it for NTFS (if available, if not you can do that later)...
XP has a built in Boot Manager..
Install XP to the new partition.. Do not use the Upgrade option.. restart machine to finalize install..
reboot to XP and go into Start Menu - programs - accessories - system tools - drive converter and use the application to make sure XP is running in NTFS mode, if not, use the tool to convert... Convert ONLY the Win XP partition.. the Win 98 Partition HAS to stay FAT32..
restart machine, you should have a screen showing both 98 and XP to choose from.
go into Win 98 and then download the updates if you can find them.. there should be a couple of sites that has all the updates in 1 zip file...
then load XP and do the same thing... you will have to do a bit of restarting to accomplish this, but it is worth it to get rid of many bugs..
Also update Direct X for XP to current version (9.0c).. and update win 98 Direct X to version 8.1 only to ensure proper compatibility for your older games.
that is all there is to is..
there are ways to install to the same partition, but the problem with that is running XP under a FAT 32 partition as win 98 will not run in a NTFS partition.. FAT 32 fragments quickly and has a habit of corrupting.. keeping the OS's on different partitions will help if an OS corrupts.. you can always transfer data from one partition to the other then reload the OS.. XP should run on NTFS so it will work faster and won't fragment as much..
Also it is recommended to have at least 512 Mb ram on your system, or even 1 Gb... XP will run OK on 512 but runs great at 1 GB.. Win 98 only recognizes a max of 512 Mb ram... I would pop in 1 Gb Ram for XP and let Win 98 just use what it can.. system should be very stable after this.
Hope that this helps.