Your friend will have to do a clean install of both OSes. It's not as simple as Ghosting his old laptop image to his new one. For a dual boot to properly work, he needs to install Win98 on the C: partition, then install XP to a separate partition. Mine is on D:\ partition. When you install XP, the NTLDR will setup the dual-boot menu for him so that it will give him the choice when he boots up to choose W98 or XP. There are so many links on the internet on how to dual boot, I'm not going to post all the details here, i'll post back with a link.
EDIT:
I lost the link i had, but no matter... Here is an e-mail i sent to someone who had the question. You'll notice this person had Win ME - but the steps are still the same. Win me is just another Win9.x based OS. Make sure your friend has the proper XP drivers for his devices in his laptop before he starts.
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Pet, your situation will go much smoother if you install Win ME first and Win XP second. This is the easiest way because Win XP will recognize the existing Windows installation, and modify its built-in boot menu accordingly to give you the choice of booting either Windows me or Win XP.
After it's installed, boot up normally to Win ME and insert your Win XP disk.
You will see a pop up window, asking you if you want to upgrade your current version of Windows. Since you want to set up a multi-boot configuration and preserve your existing Windows me installation, it is important that you answer No. Now you'll see the actual setup screen. Click on Install Windows 2000 to begin.
The first screen of the Win XP setup wizard will ask you whether you want to upgrade to Win XP. Click No. Choose the second option and click Next.
After accepting the license agreement, you'll see a screen with three buttons. The middle one, called Advanced Options, is the important one. Click it. In the resulting dialog box, be sure to check the box that says "I want to choose the installation partition during Setup". This will allow you to put Win XP into its own partition a bit later in the text based portion of setup. Click OK, then Next to proceed. Win XP setup checks your computer, copies some files, then reboots your machine.
The next part of the setup almost looks like the BSOD, but don't worry, that's the way it's supposed to look. After hitting Enter to start the actual setup process, you'll be presented with a screen displaying the existing partitions on your hard drive. Here you need to select a partition OTHER than the one where Windows me is currently installed as the installation location for Win XP. Highlight the appropriate partition and hit Enter.
The next screen will ask you about the file system for your Win XP partition. Remember that Windows me cannot read NTFS, therefore you should choose to keep it as FAT16 or FAT32 if there is any chance that you might need to access data on this partition from Windows me.
After checking your drives, Win XP setup will copy more files and then reboot your machine
After your OS is finished installing, the first driver should be the chipset drivers; then video drivers (if any) followed by any other drivers he may have.