I think I understand your question, and suspect that you are confusing two issues?

1. partition managers "hide" OSes from each other so that they don't overwrite eachother's files.. That is perfectly OK and what you want to happen

2. If you load Win98 and WinXP and have a FAT32 file system for Win98 and NTFS for WinXP the XP can "see" the FAT32 partition, but the Win98 cannot "see" the NTFS partition. You would have to use FAT32 for both, which would take from the functionality of the XP installation.

What you might like to consider: set up a third FAT32 partition to store the common data files that you want both systems to access.

Hope that helps