Here is how to install win98/ME on a computer with WinXp/2000 already installed on a NTFS partition.

First, format a partition with FAT32. (Use partition magic v7 or greater or
similar to create a partition if there is no space left.)
Make the partition active.

Copy win98/ME cab files to \windows\options\cabs on the new partition.
Boot computer with a win98 boot disk (Use winimage to create boot disks)
Install Win98/ME from directory.

Now, use your winXP/2000 CD and start installation under win98/ME.
When it prompts you to reboot, reboot back into win98/ME and not into
winXP/2000 setup.

Edit Boot.ini file on the Fat32 partition from:
[Boot Loader]
Timeout=5
Default=C:\$WIN_NT$.~BT\BOOTSECT.DAT
[Operating Systems]
C:\$WIN_NT$.~BT\BOOTSECT.DAT="Microsoft Windows XP Professional Setup"
C:\="Microsoft Windows"

To:
[Boot Loader]
Timeout=15
Default=C:\
[Operating Systems]
C:\="Microsoft Windows 98 Second Edition"
multi(0)disk(0)rdisk(0)partition(1)\windows="Microsoft Windows XP
Professional"

You can safely delete the $win_nt$.~bt directory afterward.

That is all there is to it. WinXpFix.com