I want to update windows98 with windows XP without formatting the HDD. Is it possible? I tried but it is not showing update option..?

You can upgrade most Windows client operating systems directly to Windows XP Professional. If you upgrade instead of doing a new installation, you will not lose the existing settings and applications on the partition. When preparing for an upgrade, you should first complete the tasks listed on the pre-installation checklist that appears in the Planning Your Installation section of this module, and then prepare your system for the upgrade. Preparing for an upgrade consists of these additional tasks: Identifying the upgrade path Preparing your system When you upgrade, you can choose an Express Upgrade, or the Custom option. The Custom option enables you to select the partition on which Windows XP Professional will be installed, and to select special other non-standard options. In this lesson you will learn about the following topics: Identifying upgrade paths Preparing your system Choosing an installation type Upgrading computers running Windows 98 Upgrading computers running Windows 2000 or Windows NT 4.0 SP 5.0 Installing Windows XP Professional in a dual-boot configuration Preparing Your System Preparing your system for an upgrade is as important as planning an installation. Systems that are not properly prepared may have problems during or after the upgrade. Use the following tasks to prepare your system for upgrade. Determine hardware and software compatibility. Microsoft provides a compatibility tool at: Microsoft.com/hcl. You can also run the Windows Readiness Analyzer (Winnt32 \checkupgradeonly). Install hardware and software updates as necessary. Review your current system information and compatibility reports, and then obtain hardware and software updates from your hardware or software manufacturer. It is particularly important to ensure that you have the latest BIOS (basic input/output system) that is available from your computer manufacturer. If the computer has BIOS anti-virus enabled, you must disable this option. Back up files. Use the Backup Wizard to back up your files to a disk, a tape drive, or another computer on your network. Scan for viruses. Use anti-virus software to scan for and eradicate any viruses on your hard disk. Uncompress compressed drives. Uncompress any drive compressed by using DriveSpace, DoubleSpace, or any compression method other than NTFS compression before upgrading to Windows XP Professional. Do not upgrade to Windows XP Professional on a compressed drive unless the drive was compressed with the NTFS file system compression feature. Uninstall incompatible software. Certain types of software may be incompatible with Windows XP Professional, and should be removed prior to upgrading. While not every instance of the following types of software will be incompatible, these software types may be incompatible: Third-party networking protocols and third-party client software that do not have an update in the i386\Winntupg folder on the Windows XP Professional CD-ROM. Anti-virus applications and disk quota software, because of the changes in the version of NTFS used in Windows NT 4.0 and later versions. Custom power management software or tools, because the Advanced Configuration and Power Interface (ACPI) and Advanced Power Management (APM) features in Windows XP Professional replace these tools. When you perform an upgrade to Windows XP Professional, you can select an Express upgrade or a Custom upgrade. Upgrade (Recommended) An Upgrade will automatically upgrade your Windows installation in the existing operating system folder, and maintain all existing settings. An express upgrade is the recommended type of upgrade. Custom Upgrade A Custom Upgrade performs an upgrade of your existing Windows installation and enables you to customize the installation by: Changing the installation partition. Change the installation folder. Changing the language options. Converting the file system on the installation partition to NTFS. Upgrading Computers Running Windows 98 To upgrade from Windows 98 to Windows XP Professional, perform the following steps: Insert the product CD. Select the Upgrade to Windows XP Professional (Recommended) check box, and then click Next. Read and accept the licensing agreement. Specify any update packs that are required to make your applications work properly with Windows XP Professional. Update packs contain migration dynamic-link libraries (DLLs) that update an application so that it works in Windows XP Professional. They are available from the software vendor. Select the partition on which to install Windows XP Professional. If you are installing the system onto an existing FAT partition, specify whether you want to convert the partition to NTFS. Important: Windows XP Professional provides an uninstall tool when upgrading from Windows 98 on a drive formatted as FAT or FAT32. Therefore, when upgrading this type of drive, you will not have the option to upgrade to NTFS, as this would negate the uninstall option. However, you can convert the drive to NTFS after installation if you choose. Review the upgrade report. Setup generates an upgrade report to alert you to any compatibility problems. Every application on the computer is scanned for known problems, and upgrade packs are recommended as needed. Upgrading Computers Running Windows 2000, or Windows NT Workstation 4.0 SP 5 Because Windows 2000, Windows NT Workstation 4.0 SP 5 and Windows XP Professional share common registry, file system, security, and operating system kernel structures, nearly all applications that run on Windows 2000 and Windows NT Workstation 4.0 SP 5 will run without modification on Windows XP Professional. Upgrading from these operating systems to Windows XP Professional is easier than upgrading from other Windows operating systems because: Almost all peripherals and devices that worked with Windows 2000 Professional and Windows NT Workstation 4.0 will work with Windows XP Professional. The version of NTFS used in Windows NT Workstation 4.0 is automatically upgraded to the version of NTFS used in Windows XP Professional during the upgrade process. Note: A few minor incompatibilities exist between the version of NTFS used in Windows NT Workstation 4.0 and the version of NTFS used in Windows 2000 and Windows XP Professional. For example, file system filters used by anti-virus software and third-party networking software that were originally written for Windows NT no longer function between the two versions of the file system. Upgrading Computers Running Windows 2000, or Windows NT Workstation 4.0 SP 5 The upgrade process for client computers running Windows 2000, or Windows NT Workstation 4.0 SP 6 is similar to the upgrade process for client computers running Windows 98. To upgrade clients running Windows NT Workstation 4.0, perform the following tasks: Start the computer from the product CD. Select the Upgrade to Windows XP Professional (Recommended) check box, and then click Next. Read and accept the licensing agreement. If you are installing the system onto an existing FAT partition, specify whether you want to convert the partition to NTFS. The files are copied, the computer restarts, and the upgrade finishes without further user intervention. Important: When upgrading from Windows 2000 to Windows XP Professional, the upgrade cannot be reversed. Therefore, after upgrading to Windows XP Professional, the only way to return to Windows 2000 is by reinstalling the product. Installing Windows XP Professional in a Dual-Boot Configuration A dual-boot configuration enables you to choose between two or more operating systems each time you start the computer. By using this type of configuration, you can run applications that are not compliant with Windows XP Professional on an existing operating system, while using Windows XP Professional for all other applications. Important: Some operating systems, such as MS-DOS, do not recognize partitions formatted with FAT32 or NTFS file systems. The active partition is the partition from which the computer starts, and it must be formatted with a file system that is recognized by both operating systems. For example, the active partition must be formatted with FAT when you have a dual-boot configuration with MS-DOS and Windows XP Professional, or FAT32 when you have a dual-boot configuration with Windows 98 and Windows XP Professional. The other operating system must be installed first, and then you can install Windows XP Professional on the active partition or on another primary or extended partition. When you choose to install Windows XP Professional on a partition other than the active partition, Windows XP Professional will copy the necessary files to start the boot process to the active partition, which is referred to as the Windows XP Professional system partition. This enables Windows XP Professional to begin the boot process. The remainder of the operating system files will be copied to the non-active partition, which is referred to as the Windows XP Professional boot partition.

How to prepare to Upgrade Windows98 and Windows ME to Windows XP: http://support.microsoft.com/default.aspx?scid=kb;en-us;Q316639

just take 98 off, it sucks