Win XP slows down any system, really... It uses a lot of system resources. Win 98 would likely run faster, as it leaves more resources available to programs. However, it would be less stable, due to being 98. It would be a better gaming machine for older games, but brand new games _might_ not run as well, as they are likely optimized for XP, with little thought to 98. However, this will probably not have much effect at all.
You could install an alternate shell to Explorer, such as
http://www.bb4win.com . The shell is rather Linux-like in appearance, as it is basically a port of x-windows to win32. There are Versions of it that are more windows-like in appearance, should you be interested. This would use up fewer resources than the Explorer shell. Combined with windows 98, you would maximize the resources available for your games. Additionally, it would make the Win 98 OS quite a bit more stable.
Also, with notebooks, the processor speed is not exactly equivalent to that of a desktop with the same clock rating, as with most of the hardware. Notebook hardware is designed for efficiency over raw power, due to battery life and heat concerns.