I would disagree about upgrading the OS at all.
Its a better idea to freshly install the OS on a newly formatted HDD. In the long run you sum out any problems that the previous OS may of had or may conflict with with both system files merged together. It also makes a mess of your registry.
It is more hassling as you need to backup all your important documents etc, but best overall.
If youre using a WinXP "upgrade" CD, you still can install it without having a preinstalled OS. The difference is that it will ask you for verification of your older OS so have your Win98 CD handy
Windows XP Pro 2002 (SP2)
Intel Northwood 2.4GHz
Compaq Evo D510 SFF
768MB DDR PC2100
NVIDIA TNT2 32MB
Intel 82801 (AC\'97)
C: 40GB (FAT32)