If both the Windows XP PC and the Windows 98SE PC have internet access via the router then they are already networked. Forget wizards and forget USB flash drives - you don't need either!
You do need to set at least one folder in each PC as "Shared" in its Properties. In the Network Properties of both PCs you need to have these two installed:
1) Client for Microsoft Networks
2) File & Printer Sharing for Microsoft Networks
In the Network Properties box in Windows 98SE, you should click the File & Printer Sharing button and tick one or both boxes as appropriate.
Any firewall software needs to be configured to allow access to the networked computers. This may involve entering their IP addresses in a "trusted" area.