DO NOT need to install windows ME
Since you have windows XP Upgrade, you need to do a "clean install". With XP Upgrade you can do this by selecting
1) Do not enter your X key when prompted.
2) On page displaying your drive select advanced and DELETE all partitions on HDD.
3) Complete install.
4) The redo Installation, but this time select the "upgrade" method and enter your key this time.
Select the Custom method to delete all partitions, exit and restart XP installation but selecting upgrade method.
You will be prompted to insert your Old qualifying ME disk to verify that you qualify.