I have a Windows 98 computer connected to the internet, an old windows XP system & a brand new windows XP system that aren't.
I have previously downloaded files from the windows 98 computer onto an external usb hard drive, and transferred them to the old XP system via the usb drive with no problem.
Today I tried transfer files to the old XP system , the drive is being picked up but the files cannot be read , it says they are corrupted ( even though windows 98 can run them ).

I tried to transfer the files to his new XP system & the same problem occured. How can I get these files off the external usb drive ???
( My cd/dvd writer is not reliable )

I Plugged drive into old Windows XP System , it 'dinged' to confirm connection of usb device, it was not listed in 'my computer' & 'my computer' actually froze, I went into 'disk management' drive was listed- basic partition, healthy active, but free space was listed as 149 out of 149 GB.

Plugged usb drive back into win98 system, files all ok, ( was able to install software from it , run/ save web pages from it, & view movies & pictures )
.
One thing I have remembered, winXP used to show more free space available than win98 did.

Any ideas?

You haven't used any compression tools on the USB stick havew you? Windows XP does not like old compression tools and cannot read them, try turning that off first.