You can share files between W98 and XP, as I did this quite often.
Not sure if the "Home Version" of XP will, but the "Professional Version" did.
Only thing is there is an incredible latency when accessing the W98 machine from the XP machine.
I had to not map the W98 drive automatically at login, because it made everything halt for a good minute after sucessful login.
Even if I read the W98 drive via network connections, it had endless wait states before you could see anything.
It was a lot of fun printing to that machine! Took eons to print large heavy documents, and freaked out the application a bit while the print job progressed.
Funny thing is, there was very minimal latency logging onto the XP machine's Shared Directories from the W98 machine!
Security issues maybe?
BTW, the XP machine's File System was NTFS and the W98 machine's was - of course, FAT32
