"Can I install Win xp on the second drive while keeping Win 98 on the first drive?" - Yes you can!
"Should I change the jumper settings on the 2 drives to ensure that Win xp installs on my second drive or is it better just to disconnect the power cable to the first drive when installing xp on the second drive." - Set the jumpers for master and slave configuration and leave both drives connected when you install XP to the second hard drive. XP will "see" the 98 installation and make the chnages to give you a dual boot system.
"Also If I can have a different operating system on each drive, how does the computer know which operating system to boot from. Will the starting up screen give me a choice of which op system to boot from?" - Yes the XP installation will make the changes so that you have two options to choose from when you start your computer. By default it will boot into XP with a count down. You can in/decrease the countdown and chnage the defualt target OS.