It's very hard to have 2 OS's on the same partition, lets say, I don't have any idea how to do, and if it would be possible, I wouldn't recommend doing it. Why?
Win98 uses the FAT system, which is unable to store permissions on files, which must be possible when installing Linux. There is no reason to have users "Joe" and "root", if you can access all the files from Joe anyway - the whole security is gone. Nuff said.
Now what do you want do do? You have winXP on C, and want win98 AND Linux ALSO on C? Not possible. I would do the following: partition your first hd to have at least 2 partitions, if you have enough space, make more. Make smaller "system" partitions: C: for Win98 (fat, win98 must be installed in C), D: for WinXP (NTFS. Can be accessed read-only under Linux, no write support as of now), and then a Data partition (FAT, can be accessed from Win98, WinXP, Linux). Install Linux then somewhere else (on your second hd?)
The other questions:
-XP does have an OS chooser, but if you're using Linux, I would recommend using the Linux boot loaders (Grub or Lilo - all of which come with basically every distro). You can boot every OS from it.
-What Linux? Your choice. Find any "Which distro" thread and decide what you want. There is no such thing, a"best distro"
-Java based OS? Nope. Java is a programming language that requires a run-time environment for every specific OS it's running on. You can run a Java program on Linux, Win, Solaris, BSD etc, but there is no Java OS
-Instructions? Click that search button on the top-right. I'm sure you can find almost every answer to your question there.
Some useful links are: The Distro's homepage (which you want to use),
www.tldp.org, www.linuxquestions.org 
... I can't think of another important one...
Good luck
Linux vs. XP: Sharing a partition
Whatever you feel like using, most newbies find Xandros, Mandrake, Redhat or SuSE to be a decent selection to choose from, but you are only limited by HD space, time, and what you can find from 
