Personally I think that Direct X is better imbedded into XP than 98, so I think that Windows based games run better in it. The problem you run into with XP is that some Dos programs won't run, or at best won't run correctly on it, and I'm not sure if you can run Dos as a second operating system from the boot menu or not. Someone with more knowledge on that could tell you. I do know you could always just load both operating systems, 98 and XP, if you're going to have a keyboard handy on your machine to switch between them at startup that is.You know what they say, sometimes the best answer to an argument is to compromise by doing both choices.
Another thing with playing PC games on a top of the line video card is to get the best quality. Since that quality is already going to be hindered by the Arcade monitor as opposed to the PC monitor, all you have to do is start turning settings down and a lot games should be playable with a Radeon 7000.