Egghead told you the best solution to get this done.

Click start, my computer, right click on the windows 98 partition, click format, select which file system you'd like to use, NTFS seems to work well with XP, and click start.

Just make sure, like egghead said to copy any valuable data to your other partitions, before deleting the 98 partition.

About the boot, click start, right click my computer,
click on properties, click on the advanced tab at the top, click on the startup and recovery options,
then click "to edit the startup options manually" the edit button,
Then delete the entire line that references windows 98, but leave the XP line intact. Make sure the XP line is set to default.

[boot loader]
timeout=30
default=multi(0)disk(0)rdisk(0)partition(1)\WINDOWS
[operating systems]
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="Microsoft Windows XP Professional" /fastdetect

multi(0)disk(0)rdisk(1)partition(1)\WINDOWS="Microsoft Windows 98" /fastdetect

Check the Multi, disk, rdisk, partition, for the one that says
default=........

MAKE SURE IT IS THE PARTITION WITH XP, as in the above case:
default=multi(0)disk(0)rdisk(0)partition(1)\WINDOWS

which is the XP partition:
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="Microsoft Windows XP Professional" /fastdetect

If you get this wrong you will have a hard time recovering the boot process...

I did this once with XP and another, yet to be released OS, and I had to reformat everything.. so be careful.

I accidentally deleted the XP reference line, and set the default to the OS that I deleted.
the PC wouldn't boot..

Be very careful with editting this file.
Welcome to TZ. Please keep us updated on your progress.

BB