XP ain't going to work in a 16-bit machine, it's a 32-bit (or 64-bit depending on edition) operating system; even 98 wouldn't because it's 32-bit as well. Are you sure you aren't just talking about the file system (is your drive formatted as FAT16)?
No a6 bit win 98 operating system exists. Just reformat the harddrive as ntfs to make sure everything is simple and install xp. Make sure to only format the harddrive during the instalation of xp. Dont do it before the installation or you might have a problem.
Yes. It can, however, run on externally 16-bit, internally 32-bit CPUs, like the 386, but even then it would be a pain to set up and there's no way you would ever get XP working on it.
Hmmm...I'm pretty sure if Windows 98 ran on a 16 bit processor (we're talking 286 here) it would be unbearably slow. You'd better find out what your computer actually has in it before you can get an answer from us.