For a dual boot setup, fdisk and create 2 partitions (size of partitions depends on what YOU what). Install 98 first, followed by 2K.
As far as files system goes, NTFS is superior to FAT32. However, if you plan on sharing files/programs between the 2 OS's, you may want to use FAT32 so everything can be seen by each OS. Just my opinion. If that doesn't matter much, then by all means go with NTFS.
I think 98 will see 60GB...it sees my 50GB partition.
You can also create 3 partitions if you wish: 1 (c) for 98. 2 (d) for 2K. and 3 (e) for programs and/or important files.