If you're going to be reinstalling Windows on any of the drives, I'd go ahead and use XP's tools and blow the setup away. The reason I say this is because you'll want to install Windows 98 first, and then XP, as the XP bootloader can then automatically detect the 98 installation and account for it. If you install Windows 98 on the system using the method you described, it will kind of "throw a wrench in the works", as it might overwrite XP's bootloader and render XP unbootable.
What type of system do you have, anyways? You might be able to do without that "recovery" partition, as it might just contain diagnostics on certain machines.
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