Well... I'm using partition magic 8.0 for one month ago. I have XP, and i tried to install win 98 and linux. I got the same problem when I installed for first time win 98, then I resetore my disk and I installed win 98 again and I didn´t have any trouble. Then I installed mandrake linux fine but today I've installed RH9 too, as you and I got the error again. It seems that the problem in my two cases is that I left the instalation to format the partition I made with Power Magic. The problem might be that Pawer M. create system files in this new partition, and when you format those files partition magic crashes.
You can run partition magic in dos/rescue boot diskettes!!!
I'm going to install the patch 8.1 for Pastition Magic, if its dont fix anything then I will run PM and delete my linux partiton for later make it again.