I would get the 98 XJ if it were me, simply just because Grand Cherokee's are more for the road than anything else (I'm sure I'm gonna get a rash of crap for saying that). The XJ will definitely be a much better choice in the long run IMO and here is why...
1. Cherokee's in general can be found almost everywhere on Craigslist or E-Bay and they are generally reasonable to buy.
2. A Cherokee will be an extremely cheap vehicle to own and operate if you are capable of doing automotive repairs by yourself, and even if you can't it is still cheap to repair.
3. The Cherokee is one of the most capable off-road SUV's even in stock form and can handle lots of things that most full size SUV's couldn't. (I've seen it!)
4. Compared to the Grand Cherokee, the gas mileage will be slightly better, but not by much. All you can do to improve their gas mileage is be on top of routine maintenance.
5. The XJ will have the bulletproof AW4 or AX-15 compared to the G.C's crappy Dodge Transmission. (You usually see people trying to get rid of the G.C on CL because the trannies are have gone South for the Winter.)
All around the XJ will be a better choice in so many ways, but everybody is entitled to their own opinion and those are mine. My advice before buying is to search this forum and CherokeeForum to see what things usually go wrong with them so you have an idea on what you are getting into. I think you'll be much happier with your purchase if you get the XJ though.
Good luck in your purchase fellow Jeeper!