Having Windows 98 installed doesn't make any difference. But you need another partition to install WindowsXP to.
You would need to let Linux install LILO or GRUB. The Windows boot loader doesn't support Linux. In other words you couldn't access Linux.
I understand that Windows XP SP2 is on the horizon, but don't know any further details.
The Windows XP SP1 installation made no objections to my Windows98SE disc, when I upgraded. That same disc came with my computer. However I don't know how legal this is.