Just do a quick Google search on 'Dual boot 98 and XP' and you'll get loads of hits. Just had a quick look and this was the first thing to come up....
http://forums.devshed.com/t57635/s.html
Looks like you should be ok to install XP on the new HDD, then it's up to you if you want to keep it as a dual boot, transfer your files about etc.
ps, I'm not a propper computer bod, so don't just go on my say-so.