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Windows update or manufacturers website is always a winner.
Always should the drive be partitioned. As NTFS for Windows 7. You can edit partitions while installing Windows through the installation menu or command prompt, or in diskmanager after the operating system is installed.
You will have to modify boot.ini if you want to have both systems.
A driver is always required to use the sound card. Depending on the age and popularity of the card, Windows 7 may include a driver for the card, so that one does not need to be installed manually.
Yes, printers are (almost always) compatible to both PCs and Macs. Make sure you have the right drivers installed and that the printer is hooked up.
The operating system is unless you boot it from a USB stick or DVD always on the hard disk inside the PC. Standard for Windows is C: but this may vary on your configuration.
No, you shouldn't need a drivers disk besides the Windows 98 disk. It is however always better to do a fresh clean install rather than an upgrade as this just "overlays" your Windows 95 and there have been some problems with the upgrades. If the system asks you for a certain driver, you can alway go to Microsoft and download the needed driver for free.
You can always go to the manufacturer's web site and download their drivers for it. This can happen often with scanners and some cameras.
"C" is just a label given to a drive by Windows (or DOS but who runs that now?), however it's conventionally given to the first (by device enumeration) hard disk drive, which is usually where you boot from on a PC. Windows can be installed on either drive, however, so the file need not live on "C" but it will always live (without some tweaking that is not for the novice) on the root of the drive where Windows is installed. If you boot from "C", hiberfil.sys will live in "c:"
Before you install windows you have to create at least one partition and format it. After that during the windows installation process choose the partition which you created earlier for windows to install itself over there. Also you have to have all required drivers for your hardware (monitor (not always needed), video card, sound card, ethernet, wireless and so on) which you have to install when the installation process is finished. You might need specific drivers for your equipment such SATA (AHCI, RAID) or SCSI.
You can continue with the upgrade. However, you will not have the modem available to the system after the upgrade. You can see if the hardware manufacturer has produced drivers for the modem for windows XP. The HCL (Hardware Compatibility List) isn't always up to date. If you cannot find any drivers your only real option is to buy a new modem if you want to use XP.
Qttask.exe is the QuickTime daemon on a Windows computer. However its process ID is not always the same throughout all computers. Note: It may be a virus masquerading as it if you do not have QuickTime installed.