and each has advantages & disadvantages.
With 98, you're familiar with it. It's a stable and virtually exploit free in it's native form. Exploits are from IE, Outlook, Media Player & those created by 3rd party add-ons. it's cache space is limited so rebooting frequently (whenever you notice slowing down) is required and a good Cleaner program (Like CCleaner) for temp & index .dat files is most helpful. File system is fat32. Programs you add need, by nature of the beast & it's time frame, to be as small as possible. But... it's a sweet little program & I miss it a lot.
Wit XP, you get a LARGE program with multiple capabilities (especially with Pro). Was intended to be all things to all people by using MS supplied abilities to avoid conflicts with or created by 3rd party stuff.
Billy once said: " There is nothing wrong with MY software, it all these 3rd party....!". Hmmm....
100+ patches & upgrades later...(since SP2)& more every Patch Tuesday....RIGHT! Probably still better off than with the new Vista....With 98, & XP SP1 ,it's getting so they don't bother writing much new malware for old, almost obsolete, OS's.
Your BIGGEST consideration is/will be if your 98s' hardware platform, MB, HD, Bios, RAM expand ability & power supply can comfortably handle the new increased needs of XP so as to give you pleasing performance. Suggest at least 512 RAM & 80G HD. XP is almost unlimited on the upside for handling Hard drive size & RAM amounts. How many USB (2.0!!) ports will you want for printers, scanners, cameras,etc.etc.Also consider the cost of programs you'll want to buy to replace those from 98 as in truth be known, there's a big gap between Fat32 & NTFS (XP) and many programs aren't Evil Kneivel enough to safely jump the bike across it. Many didn't fully recover from SP1 to SP2.
For my money, I'd keep the grand old lady for more mundane tasks around the house and spend the money on a new machine for the XP. Cost of upgrading the 98 (if you can't do it yourself) will come pretty close to a modest P4 or AMD machine. For another $200 you can go well beyond "modest".
To answer YOUR question: Suggest Clean Install on new machine! JMHO. Best of Luck!