First things first, yes the Upgrade will work OK.
Now the really improtant part!! Do not perform a Windows upgrade from 98 to XP.
The same can be said about upgrading from any previous version of Windows to a new version.
You will be creating more problems than you will be solving. The best thing to do is to backup all your important data, format the disk, and then boot from the Windows XP CD. It will start to go through the install process, and it will then ask for the product you are upgrading from. Bung in your 98 CD, and after a few seconds it will spit it out and want the XP CD back.
After that, follow the prompts to install XP and enjoy

Just don't put the XP CD in and expect an upgrade to work like magic. Even if everything seems to be OK, you will run into problems. You'll have bits of drivers from Windows 98 left over, files here, files there, and it will generally be a mess.
Your life will be much simpler all round if you zap your hard disk and do a clean install.