In that case I would be tempted to just delete the 98 Windows folder (in safe-mode or even DOS if necessary) and leave it like that, making modifications to your boot setup file if required. Double check you know which folder is for which. I've never seen a dual boot on the same partition before and I am actually quite curious as to what goes where. I'd wait to hear the others' view on this first though.

The bottom line is, an operation like this is always risky, and if you carry it out, you must accept the possibility you will may to buy a new legal XP disk if problems occur.