I'd bet his problem is that the XP box can see the 98 machine but not the other way round. I think this will be down to the better security features of networking that came in with Win 2000.
The user details of the Windows 98 machine (the name and / or password used to login, automatically or not) need to be entered as an additional user on the XP machine. Go to Control Panel, Users & Add User Account. Enter the details exactly as they are on the 98 machine.
You'll never login as this user on XP, but now when the 98 machine attempts to query it in any way, XP will allow it through because the user is authorised.
I might be way off with this, but I've set up quite a few (very basic!) peer-to-peer networks & this was an annoying problem when 2000 came in.
Just thought, it couldn't be a firewall could it? I have ZoneAlarm on my machine & it's a bitch to the Win98 I also have on the network!