Hello,
There is a way to do a "Direct Connect" between the two computers. You need to buy a cable that will plug into the serial (?) ports. I haven't succeeded with it yet, but there are instructions that come with the "Files and Settings Transfer Wizard" on XP. It starts with the description of the cable-link. It is made for copying files from old to new o/s, so you don't want to go that far. The protocols you will need for Win98 machine can be gotten from Microsoft Legacy system "support". What I wanted to do was logon to my old machine to do what you want to do, use it for a backup and access the good old programs there. Make sure you get a free firewall for your 98 machine, and when you run the netsetup.exe, you will have to approve the connection on both firewalls.
I stopped working on that method when I got DSL (FIOS) from verizon that gave me a really nice router and I can plug both machines into that. I get stuck when the Network Wizard (after you have the two machines wired via their ethernet ports or serial ports) wants to write a network setup disk to removable drives that do not include my DVD writer. But then I got a flash drive and it did give me that option, to write to the flash drive.
Your USB ports on your 98 machine are probably in the back and hard to reach, which makes the flash drive solution painful. However, I do think the flash drive is the easiest solution, especially if you are only going to copy over text and e-mail files. Do read up on how to backup and restore Outlook Express mail files, also your address book. It is a different method; make sure you load your mail files into your win 98 OE before you write over the medium you use to transfer the files (dvd, cd or flash drive).
Flash drives are on sale at Best Buy right now, only $10 for a 512 meg. Of course that is small and they offer one gig for $20. Those are good buys. Just look for them on sale.
I spent almost $20 on the cable to direct connect the two machines, and that was a sale price. It was expensive because each end of the cable has two sizes of plugs in case the machines differ in size. I kind of liked that solution (if I can ever make it work) because then you can logon to your old machine and use your new monitor to access both machines, and not need to have your router turned on (connected to the internet). It just depends on what kind of hardware you already have.
One other solution is to dial-up to the other machine. That takes a different set of protocols (eg tcp/ip) and some others. Not sure, if you only have one phone line, if you can be online plus call your other machine.
If you respond with what hardware you have, and if you have an ethernet card in the old machine, check the speed of it 'cause the old ones ran at 10 and the new ones run at 100 and if you have different sizes, the data will transfer at the slowest rate.
So, I guess the answer to your question is "Yes". The help in XP has some decent descriptions of the different ways to LAN your machines together. Hopefully one of the engineers out there will notice this question and add info/corrections to this post if needed.
Best wishes,
"joygreen"