When dual booting between 98 and NT a number of issues arrise, not the least of which is do you want to share files between them? Since NT does not recognize FAT32 and 98 does not recognise NTFS the problem is pretty obvious.
Options:
It really is a question of security and convenience. If you can live with the wasted drive space, slow performance and utter lack of security, use FAT16 the whole way. Partition your drive as you see fit, format it all FAT16 and install 98, then NT. Be aware of partition size limits (2GB for 98 and 4GB for NT).
Create a 300MB C partition formatted as FAT, a second partition for 98 using FAT32 and another for NT using NTFS. Install 98 first and put it on the FAT32 partition, then install NT on the NTFS partition. You have to be careful about the initial partition sizes since there is some restriction regarding the location of the NT system partition on the physical disk (is this still true, anyone?).
A third option is to use more than one HDD. A first drive, again with the 300MB C partition, the rest given over to FAT32 and 98, the second drive NTFS and given over to NT. This is my preferred configuration. The 300MB FAT13 partition lets you park files you want to copy between opertating systems. If you need more shared space create another FAT16 partition on the NT drive.