The simplest way to do this would be to add a second drive.
What I would do, is as follows;
Install any small drive as the primary master drive.
Install the drive for W98 as the secondary master (D:) drive.
fdisk the d drive for a primary dos partition, and extended dos partition with logical drives as needed.
Choose custom when you install 98, and direct the install to use the D: drive.
After you have 98 working properly, with all drivers and updates installed, shut down, and replace the C: drive with the XP C: drive.
Now comes the fun part.
For compatability, after XP boots, and finds the W98 drive, go to Programs/ administrative tools/ component manager/ disk manager
Use the XP tools to make the CD drive what ever letter you need, and make sure that the W98 drive beccomes your D: drive.
Now, you need to edit the boot.ini file in the root of the C: (XP) drive.
You may need to enable view all files in explorer, and change the read only attribute to gain access to thefile.
You need to add a line to allow booting to the W98 drive.
For command syntax, and tips, go to the boot.ini page at www.systeminternals.com
Or, search Microsoft's site using the terms boot.ini and bootcfg
You will get around 20 useful pages of command and trouble shooting information.
That should have you up and running.
Chas