For a full ubuntu install you need about 2GB (according to their website). They also recommend at least 128MB. Now, if you're bumped up against those numbers in any way, you can do some things to make it better. The thing that I always do is install a minimal system (you might have to type expert at boot
when installing. Then you'll get just a command prompt (the bare ubuntu system). From there you can apt-get install
only the things you really need. And stay away from Gnome or KDE as desktops. Try XFCE4, windowmaker, icewm (or google for lightweight window managers).
Oh, and before resizing the windows 98 partition, did you scandisk and defrag it?