You're going to want XP on a larger drive. Your Windows 98 applications may not all be compatible with XP. In the long run, I think you will be better off with a clean installation. All of your data is on your 10 gig drive already so no extra backup steps are needed. I am also presuming you have determined your existing hardware to be capable of running XP. If not, you will soon find out. Anyway, here goes.
Remove the 10 gig drive and replace it with the larger one. Have your qualifying Win 98 CD handy. Change your BIOS to boot from the CD ROM drive and run the XP installation program. Because it's an upgrade version, at some point, you will need to supply the Win 98 CD to qualify for the upgrade or the installation will fail. Complete the installation of XP and examine the hardware device manager to see if XP found drivers for all hardware. If not, you get to search the manufacturer's sites for compatible drivers. If all goes well, you can load the apps you wish. Once all is working well, you can connect the old drive to the PC and copy over any data you wish to keep. Because you have the old drive intact, you have the advantage of going back to it if need be. Good luck.
I just purchased the xp upgrade but now I also want to install a bigger harddrive. My current OS is 98se and old harddrive is only 10g. Should I upgrade first on the old harddrive and then install the new harddrive? Or should i install the harddrive and then install xp? Thanks for any help you can give me.