To my knowledge, the '98 w/manual trans didn't have a skid plate under the trans just the transfer case skid/support, which won't really affect your front drive shaft at all. Do you have an after-market skid on there? Maybe a pic. of it would help.
On my LJ w/auto trans, I cut off the left front support (where it went under the drive shaft) and welded in a loop up over the top of it. Not quite as strong as the original, but I have balance the weight of the Jeep on it and it didn't crush into my trans pan.
It is the stock transfer skid/mount. The pics are of the jeep sitting flat on level ground. Not the best pics, but there is really only about an inch or so of clearance. Thanks for your response.
Yeah, you definitely don't want to weaken the Transfer case skid too much, as it is the support/mount as well. As suggested above, I think a small notch with some reinforcement would be fine. That close to the t-case, the flange/u-joint end of the the drive shaft actually only drops a bit compared to the axle end.