When you say "in the same partition", I assume you mean on the same hard drive. Its impossible for XP and 98 to share a partition. XP barely even recognizes 98, and its totally incompatible as far as sharing any space with it.
If you had both on the same drive, yes, you have to reformat and reinstall XP. If you have access to a second HD, it would make things easier. You could do the install on the extra HD, then transfer the settings and proggies over from the old XP install to the fresh one. Then you could wipe the original clean.