Bert

(Right now I am answering "from the seat of my pants".) I
have only had experience with NT vs XP, but someone else
may verify this. )

Philo's response told you most of the story.  You install
98/Me in the empty (FAT32) partition.

After that, your computer will only boot
in the Win98/Me mode, so you need to do the XP repair
process.  This should install a boot loader program that
gives you a choice of booting under XP or "Windows". (It
would also let you select a different partition for booting
up XP so you could have two different XP systems to choose
from.  In that case you would run the XP installation which
at some point you should be able to choose where it is
installed.  Then the XP boot choices should also appear on
the boot loader menu when starting the computer.)  

There should be a way to edit the selections on the boot
loader to say "Windows 98" vs the more generic entry it
provides.

Other boot managers are available from a number of sources.
IBM had one that was provided with OS-2.  Some Linux
distributions probably come with one.  There are a couple of
commercial products like System Commander that allow the
use of multiple operating systems on a single computer.  

Nic