I said this in my original post that I accidentally deleted before posting. Anyway, I would suggest setting up two partitions on your clean harddrive, minimal install 98 on the boot partition and XP on the other, and install identical hardware onto each before throwing it in the cab. This includes different versions of MAME, Front Ends, drivers, etc. Then take 'em both for a test drive, compare and contrast and see which works best.
Although in all honesty, I'm betting that you're not going to find a dramatic difference. So if you have XP maybe that's the way to go.
P.S. - Be careful with the Newer=Better mantra. Keep in mind:
Windows ME is newer than Windows 98
New Coke was newer than the original formula
and so on...
But I know what you meant

- yes XP is a stronger OS than 98.