What your doing won't work. You have a number of options to use. One is to xcopy the entire xp disk to the 4 gig partition and boot to it and install to the 16 gig. That is by FAR the easiest I've found. I wouldn't highly recommend XP however unless you plan on stripping it to the bone using xplite or something of that sort. 98 isn't even all that fast on it stripped down.
I've been playing with Linux but I'm no Linux junkie by any means and command prompt to me means POS. If I wanted DOS I would have installed it, but that's just me and I don't mean to offend anyone by that comment. Everyone has their own thing and if they like it that's all good. I personally just don't care for it.
So when and if I ever get what I want, it will be (hopefully) Linux stripped down to little more than web browsing with a GUI and winamp or Linux equivalent for playing .mp3 files over a wireless network. I pray with a touch screen but so far I have a whopping none of this. I absolutely love the design of the GCTP and wish they made a new version of it the way I want it. I want it in my kitchen on my counter to play music and look up recipes with.