There may be something in your current install of Windows 98 that will not allow an upgrade. Have you run the upgrade advisor from microsoft to make sure there are no hidden issues?
http://www.microsoft.com/windowsxp/pro/upgrading/advisor.mspx
From past experiences, I find it best to to a clean install because Windows XP has had numerous issues with the upgrade.
http://www.microsoft.com/windowsxp/pro/upgrading/advisor.mspx
From past experiences, I find it best to to a clean install because Windows XP has had numerous issues with the upgrade.