You will need third party software. Acronis Disk Director is a good tool for
doing this http://www.acronis.com/homecomputing/products/diskdirector/

Hi, Oleander.

To get rid of Win98 is an easy 2-step project.  Easier to do than to
explain.

1.  To delete Win98's operating system files, just delete C:\Windows,
Win98's boot folder, including all its subfolders and files.  This reclaims
the multi-megabytes of space those files are using.  Do this while booted
into WinXP, of course; Win98 won't delete its own boot folder.

2.  There are several ways to remove Win98 from the opening menu.  One way,
after doing Step 1, is to run msconfig; on the Boot.Ini tab, click Check All
Boot Paths.

Combining partitions is another matter.  You really have only two choices:

1.  Invest your time:  Backup your data; repartition and reformat; reinstall
WinXP; reinstall applications; restore data, or

2.  Invest your money:  As Harry Ohrn said, use third-party software.
Microsoft sells no product to do this job.

RC

One clarification about removing stuff from C:\.  When XP was installed on
E:\, it probably placed a few files on C:\, specifically:  NTLDR,
NTDETECT.COM, and BOOT.INI

Whatever you do, do NOT erase these files, or XP will cease to function.

Further, if you do combine C:\ with E:\, then you will need to modify
BOOT.INI to point to the XP installation that is on C:\, since there will
not be an E:\.  If the partition is FAT32, you can use a DOS bootdisk and
EDIT.COM.  If the partition is NTFS, you will need some other tool, or edit
the file just prior to rebooting, the reboot during whihc the third-party
software will combine paritions.  Note that the XP CDROM is bootable, and
from it you can run the recovery console, which has a command called
FIXBOOT, which can find all windows installation on the computer and make a
new BOOT.INI.