dual boot XP

I have a Compaq Presario 5461 (500M Hz AMD K-6, 10Gb HD, 64Mb original RAM + 128Mb added)with Windows 98 SE and would like to upgrade to Windows XP. The HD is about half full. Because I need to run some older DOS programs and have read that larger DOS programs may not work under Windows XP (http://www.ptech.wsj.com/archive/mailbox-20011115.html,last question) I would like to retain my Windows 98 installation. I assume I can make this dual boot setup with Windows XP and run it without doing something kludgy (like booting from a DOS floppy or interrupting the Windows boot to enter DOS). But, should I

1) partition my existing drive (with something like Partition Magic, cost $65), or

2) get a new hard disk (and install an image of my original HD on the new one, then install the XP upgrade, cost about $130), or

3) just buy a whole new computer (and rig up some sort of direct cable or LAN-based communication between them, cost about $750)?

My computer skills (and patience skills) are modest, and time spent on this project is a consideration, as well as the actual dollars. Another possible consideration is
that since Compaq doesn't provide original Windows 98 SE CD's (just a QuickRestore CD), flexibility is limited if you have to re-install.