Hello,
As I recall,
Microsoft Windows 3.1 does not recognize FAT32, so having the disk partitioned into two volumes, one formatted with FAT-16 and having Windows 3.1 and the other formatted with FAT32 and containing
Microsoft Windows 98SE is correct.
The last time I ran a computer in this configuration I used IBM's Boot Manager (also distributed as PowerQuest Boot Manager with Partition Magic 3.0) to switch between DOS+WfWG 3.11, IBM OS/2 Warp and Microsoft Windows 95. You can probably purchase a copy of Partition Magic 3.0 online (eBay, EMSPS and so forth) fairly inexpensively and use that to choose between the two operating systems at boot time.
Regards,
Aryeh Goretsky