Firstly, the monitor has absolutely nothing to do with the operating system itself and could not be ‘made for Windows 98’. Monitors are made for certain output modes, and they receive that output signal from the video adapter. (I once had a tech tell me that a monitor that was ‘made for Windows 95’ could not be used on Windows NT 4.0. Shocked me, because it was the same video adapter, same resolution, same color depth, same refresh rate, and it worked perfectly fine.)
Monitors are rather like television sets in that all they do is display the picture the cable in the back tells them to. If your monitor has SXGA capability, it’s compatible with the video adpater in your computer’s SXGA signal.
The video adapter itself (which you do communicate with through the OS) is probably capable of putting out a higher resolution, color depth, and refresh rate than your monitor can display.
If your monitor can’t use a mode as high as Windows XP’s preferred video adapter settings, it’s time for a new monitor. I’m taking a guess here that your video adapter is using an SXGA output mode, and your monitor’s expecting possibly XGA type input, where WinXP’s preferance for a default resolution is 1024x768 pixels at 16 million colors, the XGA monitor will only want 16,536 colors at 1024X768.
In other words, when the monitor should be switching modes to use the video adapter’s SXGA settings, it can’t. You could tell set it to VGA, but the picture won’t display properly because the OS now gives the video card a lot more colors than it did in 1997.
Updated monitor with a capability of 32 bit color, 75 Hz refresh rate at a resolution of 1024x768 would probably work nicely.