i think that win 98 needs to be on the c drive and xp on any other drive you like , i dont see why you can t reinstall win 98 on the drive that you chose to unstall it on ,boot from the cd,there will be loads of threads on this on the site why dont you have a search
Try www.dougknox.com There is a tutorial on that site about installing 98 after XP is already installed. This will stop you screwing up your XP boot.
I also had the same problem with 98 hanging during boot. It could be down to you having a very fast processor, and 98 not having time to write all unsaved data to the disk before shutdown. Obviously when this O/S was released the processor speeds were a lot different than now. There was a patch for this on the 98 update site, but I don't use it any more so don't know if it's still there.
If I was you I would ditch 98 anyway, unless you are using it to play old DOS based games. As far as apps go, I have found nothing that XP won't run that 98 will.
yes the bootloader will stay in place,xp seems to override anything that you may install but since you have 98 on the c drive it should be ok.you havent actually deleted anything only a re-install of 98 on the already chosen c drive,you can change the boot up sequence in the advanced section in the system properties box(right click on my computer and choose properties then click the advanced tab then start up and recovery reference)hope this helps you