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A fresh install is always the best way to go, however if you are dead set on upgrading instead of formatting you can do that as well and as long as your 98 is running well it's actually pretty painless.
Had to do that to the boss' computer here. He didn't want to reformat and reinstall so had to upgrade. It has worked well for him, but then again, he isn't installing all kinds of crap on his machine either.
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