Regarding the upgrade to Win98, what qustions do you have?

Regading upgrading to Windows XP, if your hardware supports XP then, sure,
you can install (on only one computer) the copy of Windows XP you have,
though there is no need to wipe out your current Windows version first
(though yes, you can do that).

For XP, first check compatibility of hardware and your applications. Run the
upgrade adsivory tool on the CD (or download a current copy from
http://www.microsoft.com/windowsxp/pro/howtobuy/upgrading/advisor.asp). Then
use Gary Woodruff's article on upgrading to Windows XP as your main guide:
http://aumha.org/win5/a/xpupgrad.htm. I recommend that before disturbing
your current Windows installation, you use the File and Settings Transfer
wizard (F.A.S.T.) to harvest from your current Windows setup - again, former
MVP Gary Woodruff comes to your aid with the following step-by-step guide:
http://aumha.org/win5/a/fast.htm.

If there are more specific questions, feel free to post back here.