I don't know anything about the hardiskproblem you have but I can tell you how to do a dual boot.
First see that you have atleast two partitions.
second Install windows 98 first!!!
Third after installing windows 98 install win XP in a drive other then that you installed win 98 in.
For example if U install win 98 in the c: drive Install win XP in the d: drive
The dual boot option you will get automatically when Booting.
Also see that you install win 98 FIRST and then win XP
HAPPY COMPUTING