The external writer works okay on the XP machine...or Nero works with a different drive on the XP machine?
If the external works okay, then check the drivers and set up for your hardware on the 98 box. (I'm guessing USB but it could be scsi or parallel). Do other external devices work? Make sure you have the correct drivers installed and the port is functioning fine.
Are you using the Nero software that came with the external writer? Nero has many versions that are specific to the hardware it came with. Make sure the writer is supported by the version of Nero you have. If so, apply the latest patches for Nero and try again. If not, you'll need to buy a version that will work with your burner.
Good luck...hope this helps.