The drive letters always start sequentially from C for the drives and partitions. So if you had a C drive and a second HD with four partitions it would take D, E, F and G. There is no way to leave your CD-ROM as D and have the new HD select another letter.
Win98Se is not going to be a problem, but your motherboard might. 8.4 might be the largest drive your board can support without a BIOS update or overlay software for the HD. If the computer came with an 8.4 drive then there is likely a BIOS update that will accommodate a larger drive. The overlay software that will come with the HD will also allow your MB to use the drive in all likelihood. The overlay is safer than a BIOS flash but gets in the way sometimes.
If you go to your MB makers site and browse through the BIOS updates you will get a pretty good idea of whether you need to flash the BIOS to get the HD recognized without the overlay.
I would consider installing the new drive as the boot drive as it will likely be faster. You want your fastest drive as your boot drive.
Get back with what HD you get and how you want to set them up and someone will give you exact instructions. Some reading:
http://support.microsoft.com/default.aspx?scid=kb;EN-US;q255867
http://www3.sympatico.ca/rhwatson/dos7/u-fdisk-1.html
http://freepctech.com/pc/001/004.shtml (click Installing Win98)