You can access disk management if you right-click my computer => manage. You can only delete partitions and create partitions on unallocated space there but you can't change anything to the system partition (the one with XP). You also can't resize partitions.
If you wish to resize the XP partition you can give
partition logic a try but make sure you've backed up everything that's on the hard drive, if something goes wrong you'll have to reformat and reinstall all partitions, including the win 98 one. I would free as much space as I can on the partition you'll use to extend the XP partition and I would defrag it before using partition logic.
The other solution would be to reinstall from scratch : boot on the XP CD to delete the current partitions and create new partitions with the right size. You'll need to reinstall Win98 so backup all your stuff on another drive first.
I use a 15GB partition for XP with the program files on another partition. My Windows folder is 4.5GB large without the page file and my documents, and I've removed many unwanted components. I'd say that you need 7GB at the very least, make it 10GB to be on the safe side (XP will want some free space to breathe and you'll need 15% free if you want to be able to defrag the drive). You will have to deactivate the hibernate feature and move the page file to another partition (keep a small 100MB page file on the system partition or some programs will complain). You should also move the documents folder to another partition if you store your files in your my documents folder or on the desktop : right-click my documents => properties => target.
Use an XP SP3 CD to install to save some space (you'll need an XP SP1 CD) :
http://www.lancelhoff.com/2008/03/12/how-to-slipstream-service-pack-3-into-windows-xp/
Make sure you format the XP partition as NTFS and not FAT32.