I am having a little trouble understanding your questions, but I will try to respond to what I think they are.
Switching from Win98SE to WinXP could be a step up or down, depending on how you like the what I consider to be the pushy aspects of XP. It is more stable and has some nice built in features, but I would urge anyone installing it to immediately go through and trim down a lot of the automatic stuff it puts in.
You can install Win98SE and WinXP in a dual boot. This is probably the best bet if you have the hard drive space. Be sure to install Win98SE first.
If you use an upgrade for Win98 to XP, you will probably not be able to use that copy of 98 on that machine again. When you activate XP, I suspect it will include info about that Win98 and not allow you to dual boot. You would, of course, be able to use it again if you completely delete XP.
You can buy an Full OEM copy of XP for about the same price, or slightly less, than the upgrade would cost. This is what I would do if I were going to use it so that the earlier version of Win98 would still be valid.
I actually prefer Win2Kpro for stability and the fact that it doesn't have to be activated.
If you activate XP and change the software substantially, it won't make any difference. If you delete it and reinstall, it will need to be activated again, but that is usually pretty painless. If you make significant changes to your hardware or decide to use it on a different machine, you will need to contact MS and get their approval to activate it. They will want to be told that you are not using it on any other machine.
Hope this is what you are looking for.