A setup like that should work fine wth Windows 98.

I would lean toward doing a clean install. I've never tried installing 98 over top 
of 95.

And look down here for a way to avoid having to apply all those updates to 98 more 
than once, if you have a CD burner or a spare hard drive:

http://www.annoyances.org/exec/forum/win98/n1064867738

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