Are you interested in removing everything you can and shrinking the size of the Win98 partition (giving it to XP)?
In
http://forum.osnn.net/showthread.php?t=94192, _KC_ suggested
for a different purpose but you would be able to use this same program to perform the shrinking and expanding portions. I had never used this (I use the commercial product Acronis Disk Director) but taking a look at it's screenshots it looks useable.
You would have to download the .iso CD disc image, burn it to CD, boot from it, run either GParted or VisParted from the CD (either would get the job done), and use either to shrink the Win98 partition and expand the XP partition.
All after, of course, deleting the files from the Win98 partition that are okay to delete.
Also, there are free backup utilities I could direct you to to play things safe. Some are listed
here. Again, I haven't used any of these as I use the commercial product Acronis True Image.
I'm really not comfortable telling you to delete files off of Win98 and performing the other operations without a full backup of all three of your OS partitions. Caution is warranted. The only exception is the "WIN386.SWP" file. This is just Windows 98's page file and is absolutely positively safe to delete this at any time that Windows 98 isn't running without any exception. If you ran 98 again it would recreate it, but that's just one gig.
By now you should have a good idea if you want to go through this to recover at least 7.5 GB of the 8 GB partition. What I would do is immaterial.