It is not recommended that you change the drive letters in your situation. The registry in 98 will be full of entries and links pointing to C: drive, while the registry in XP will have its' registry pointing to D: drive.
How can I change the System partition drive letter in Windows XP?
XP has never needed to be on a C: drive to function correctly, it will happily function on a D: drive.
Is your XP Home using the FAT32 file system? If it is this could be the cause of the constant running of the Disk Scanning program, ScanDisk, (if that is what you meant by Disk Cleanup?).
Converting XP to NTFS would mean that 98 would be unable to access files on the XP Partition.
"Convert" is only applicable to XP, 98 must remain FAT32.
307881 - HOW TO: Convert a FAT16 or FAT32 Volume to NTFS in Windows XP
In XP, check to see you are showing both Hidden, and System, files in Folder Options/ View. In the same area make sure you have unchecked "Hide extensions for known file types". These actions will allow you to see and access the relevant booting files.
The booting files consist of Boot.ini, NtLdr, NtDetect.com, and Bootsect.dos (98 dual boot file). These files are required for successful dual booting.
If you want to remove 98, and not have it appear on the Boot menu you must edit the boot.ini file (this file may be a Read-only file).
HOW TO: Edit the Boot.ini File in Windows XP (Q289022)
An example Boot.ini involving 98 and XP is this.
[boot loader]
timeout=30
default=multi(0)disk(0)rdisk(0)partition(2)\WINDOWS
[operating systems]
multi(0)disk(0)rdisk(0)partition(2)\WINDOWS="Microsoft Windows XP Home Edition" /fastdetect
C:\ = "Microsoft Windows 98 Second Edition"
The last line is what puts 98 on the boot menu. The partition(2) parameter tells the booting process that XP is on the second partition. That may vary depending on where XP is located. To get rid of 98 delete the line C:\ = "Microsoft Windows 98 Second Edition".
You can now just delete the 98 Windows, Programs, etc. etc. files (but not the earlier mentioned booting files from C: drive, if you don't have 98 you don't need the bootsect.dos file either.
This would leave you with and empty C: drive save for 3 booting files and possibly later a recycle bins and system restore folders, and an XP operating system on D: drive. At this point you can run the "Convert" command on C: and end up with that as a NTFS drive.
You will need to keep your 98 CD in case if every you needed to reinstall XP, as that is the Qualifying Product that I mentioned earlier up this thread.