If you use Win98's Drive Converter utility to convert to FAT32 you don't have to worry, because the utility not only prevents you from converting back to FAT16, it also disables the Win98 uninstall feature. But then, like it or not, you're stuck with Win98.
So what should you do? Install FAT32 on your system before you upgrade to Win98. Uninstalling from Win98 FAT32 back to Win95B FAT32 carries no dangerous data risks, so you can have FAT32 and uninstall, too. Of course, you need Win95B to do that. To find out what version of Windows you have, right-click on My Computer, select Properties and look at the Windows version number. Unless it says something like Microsoft Windows 95 4.00.950 B, you have an older version. If you're not running Win95B, look around. You may have a license for it and not realize it. If you do, you'd be wise to install it before upgrading to Win98.
Even if you do have Win95B, you could still be running FAT16. You or your PC maker had to configure a disk to run FAT32 before formatting the hard drive. To find out whether you're running FAT32, double-click on My Computer, right-click on your hard disk and select Properties. Alongside Type, you'll see Local Disk FAT32 on FAT32 disks and Local Disk FAT on FAT16 disks. Repeat this check for each local hard drive shown in My Computer.
If you have Win95B (the OSR2.0 version) or newer and you're running FAT16, consider buying a FAT conversion utility such as PowerQuest's PartitionMagic. This utility, and others like it, can convert your drives to FAT32 without repartitioning or moving data (don't do it without backing up first), and it doesn't take long. But remember to defragment your hard drive afterward, because most files on the disk will be highly dispersed.
If you can't convert to FAT32 before you upgrade to Win98, your best defense is to save system files during setup so you can uninstall Win98. Don't convert to FAT32 right away; instead, wait days, weeks or even months to be sure you like Win98 and your installation is running well. When you're sure you're going to stick with Win98, you can convert.