You need quite a fast PC and bus as well as an absolute minimum of 256MB of memory (512 is best) to run XP happily.
The upgrade process is somewhat bumpy (despite M$'s hype) and new installs of XP work best. As Richard says, some of your peripheral may stop working and you'll need XP drivers for most of the rest. OTOH XP is a much better and more stable OS.
If your '98 is working satisfactorily spare yourself some grief and stick with it.