This can be done, I figured it out.
First install Windows 98 on C:, use FAT32.
Then boot up Windows XP Pro, choose to leave drive C: alone, and set the Windows directory from C:\\WINDOWS to C:\\WINXP or some other directory. Install XP to this directory.
Boot into XP, install drives, etc. Then after it is finished, reboot until the Safe Mode Command Line with the F8 option.
Edit C:\\BOOT.INI
In the [Operating Systems] category add:
C:\\="Windows 98"
Then exit out of Safe Mode and reboot the computer. If the menu does not start up, go to the System icon in XP control panel and turn it on.
Now you can dual-boot both Windows 98 and XP on the same hard drive!