Hey Fred,
Win XP is by far the most stable Windows OS offered. You should, however, have the right level of hardware in place to run it properly. Like someone else mentioned, your hardware is on the low-end for XP. It will be much more stable than Win98, but most likely will run quit a bit slower.
Part of it depends on what you use your computer for. A slow yet stable computer is fine if you spend most of your time in Outlook Express and Internet Explorer. If you are working with a number of large spreadsheets, Word documents, audio / visual editing applications, etc., then you are going to want to be using a PC with something like 750MHz and 512K RAM for starters.
XP adds a lot more multimedia capabilities than Windows 2000, so it is more processor/RAM hungry. If you load XP on a slower system though, you will not have the patience though to use all those neat multimedia capabilities!
Like MikeT said, Windows 2000 might be a good compromise. You get a lot more stability than Windows 98, without the RAM/processor requirements of XP.
The cleanest upgrades always involve reformatting the hard disk. It is a pain though going through and making sure that you've archived absolutely every file/setting you want to have on the rebuilt system. The best best is to burn a CD of your current HD so you can always get the stuff back. Not sure of all the apps you want to bring over, but even the basic ones require a lot of detective work to get everything back to the way it was.
Good luck! Shoot me specific questions if you have any!