Windows XP and 98 on same drive. Partition question...

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I currently have Windows XP installed on a 20gb hard drive with just one partition formatted with NTFS. I want to create a new, smaller partition (say 3gb) to install Windows 98SE on it, which I think means it needs to be formatted with FAT32. Could anyone please tell me if this is possible and if so how I'd go about doing it. Also, if I later decide to delete the smaller partition, could I reclaim back the space for the original one?
Thanks a lot in advance for any help.
 

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