First, you have to defrag your whole computer to prepare for a partitionning. Once the defrag is done, perform a scandisk (automaticaly fix errors checked), and then get yourself a copy of Partition Magic 6 or earlier (I won't tell you where to get that though).
Resize your main partition and create a new one in the free space that it created. Make it a logical partition, with FAT 32 system on it (if you make it primary, you won't see the other drive from within Windows ME).
Once you've done that, rebooted and all the partitioning is done, you will need to make sure your BIOS can boot with a CD.
Do that and boot with Windows XP cd, that will start the setup. During the installation (the blue screens) you will be asked where you want to install XP, make sure you select the partition you created for XP, and continue with the installation.
Unless I missed something, you should then have 2 choices when you boot. Windows XP on top, and Windows ME under. If you don't see it, no biggie.. You will have to boot with which ever boots, then go on the main drive, and edit the boot.ini file, look how it's done for the line of XP, and copy it, by changing the description of menu entry and changing the number of the mounted volume (where you see 2 on the XP line, put 1, since ME is on the first partition).
If all this sounds too complicated and you think I'm speaking chinese, maybe it's best if someone with more experience does it for you or assists you while you do it. Just make sure you don't mess it up. I know the best way to learn is to try and re-try again, but I'm sure you don't want to reformat the whole thing =P So be careful.