You have done it the wrong way around, but it is still workable :)
You need to run GPartEd (in Ubuntu, as root) and resize the linux partition and add a FAT32 partition (You will need to do this from a LiveCD otherwise things will break) once you have resized and added a fat32 partition (This can take a while) you can install Windows 98 on the FAT32 partition, once you have done this Windows will have written to the bootsector thus removing GRUB in the process, you need to boot from the Ubuntu LiveCD (again) and re-install GRUB to the MBR, here is a guide:
http://www.howtogeek.com/howto/ubuntu/reinstall-ubuntu-grub-bootloader-after-windows-wipes-it-out/
Once you have done this, you will need to add Windows to your GRUB menu, you can do this by adding an entry in /boot/grub/menu.lst.
In Ubuntu, open the terminal and run 'gksu gedit /boot/grub/menu.lst' and add an entry for Windows, it will probably be at (hd0,1) but you need to figure that out, the entry should be something like this:
title Windows 98
root (hd0,1)
chainloader +1
FYI, (hd0,1) means hard drive one, partition two.
I hope this helps, but if not GIYF :D