You cannot install '9x from within NT/W2K/XP. Install '9x ('98 in your case) via a CD boot (if bios allows) or via a '98 boot-disk with CDROM support - regardless of whether or not you go for a 'clean-install', or a dual-boot...
Remembering that XP can operate as fat16/fat32/ntfs...
'9x require that the C: (active Primary) partition be either fat16 or fat32.
If your current C: drive = ntfs then you will not easily be able to install '98... It can be done - but it's 'a lot' of work...
If your C: drive = fat32 (very likely?) then you should be able to install '98 in there along-side XP - and even go for a dual-boot. This style of dual-boot probably isn't advised (by M$ and the gurus); it certainly isn't for '98/W2K... But it may work OK ('usually' does for '98/W2K in most cases).
Note:
Installing '9x (after XP/W2K) will disable XP/W2K... See below for recovering access to XP, and thus turning this " '98 alongside XP installation " into a dual-boot if so wished...
If you have both Primary and Extended partitions on your drive, then you could install '98 into the Extended area, and thus go a (safer style) dual-boot (this extended partition will have to be fat32 - or even fat16 with the 2Gig limit applied). '98 boot/start-up files will go into current active Primary (C: ) partition - alongside XP. But XP access will be lost since '9x will overwrite/replace the XP mbr with the dos/'9x version - allowing access only to '98 in your case.
In either of the above scenarios, if you wanted to recover XP and complete the dual-boot, you would have to run XP set-up, choose fixboot/mbr routines and allow XP to restore the mbr to XP version, and complete the dual-boot. XP will detect '98, make the required bootsect.dos; complete the dual-boot arrangements.
If you decided to lose XP (and it sounds like you really would...?) then after installing '98 into the C: drive, just boot to '98, locate/delete (via '98 Explorer) the XP folder (winnt) from the C: drive; also the pagefile.sys. You can delete or leave the XP boot/start-up files; since they take so little space it's hardly worth the effort... - your choice. Once '98 running OK, empty recycle-bin and defrag to tidy up the scene. Then install all required apps/utils for '98.
This approach (to install '98 alongside XP)avoids having to reformat C: ; saves any data on that partition too. And if you have only a single partition (all too common these days...) then likely you do have data there as well? But it would be 'wise' to back-up/save date elsewhere first (if practical) - just to be safe?
Otherwise (for a 'clean-install' - '98 only system...) using a '98 boot-disk; reformat C: and install '98 (via CD boot/boot-disk as appropriate). If C: = ntfs then use Fdisk to delete the ntfs partition (non-DOS in Fdisk); reconfigure drive for '98; format as fat32; install '98.
If you do reconfigure drive - suggest you create both Primary and Extended partitions; Primary for OS/apps/utils, Extended for data. This allows you to reformat and/or re-install to C: without affecting data in Extended...
Fdisk tutorial and '98 installation etc.:
http://www.btinternet.com/~robert.bale1/formatinstall.htm
http://www.compguystechweb.com/index.html
XP repair routine:
http://www.wown.info/j_helmig/wxprcons.htm
courtesy of Jo Helmig at:
http://www.wown.com aka http://www.helmig.com
And if you want a starting from scratch - step-by-step - "how to" for '98/XP - with each in its own partition/logical-drive etc... browse thru:
http://www.computing.net/windows95/wwwboard/forum/130530.html (response #5).
The above link refers to '95/XP and applies equally to any version of '9x; also to '9x with W2K.
Need a '98 boot-disk; either make one via the '98 CD you have - and be sure it includes CDROM drivers/Fdisk/format; or download a complete image to your drive; (self-)expand it to a floppy. Images (get one with CDROM support) at:
http://www.bootdisk.com
and go to the w0rm link (it's OK...).