Humm must be NTFS
You need to correct the File system from the sound.
Here is how i would do this.
Reconfigure your Bios to Boot to CD first and IDE 0 second
Insert Your Windows XP disk
Boot To The CD
Tell the computer you wish to install a new copy of windows XP
When you get to the screen that asks where you wish to put the new copy there will be a Partition list. Delete the Old partition.
As soon as you delete the partition Quit the Windows XP setup.
Then Insert your windows ME cd and allow it to configure your Harddrive (It will have to format and set the file system to fat32)
Why you are doing this is beyond me XP has better functionality than ME but hey it is your computer
What I miss in the above scenario is the point where you make a new (FAT32) partition. Because you cannot do that with the WinME setup. What you have to do after deleting the partition with XP is:
Boot from the WinME CD and choose option 2: Boot to MSDOS with CDROM support
When in A:\> switch to D: (assuming this is your CDROM)
When in D:\> run the fdisk utility and create a new primary partition
When finished reboot from CD again and choose option 1: Run setup from CD
Now you can run WinME setup and allow it to format the newly make FAT32 partition. Before doing this (it's your choice), please make absolutely sure you have all necessary drivers available. The ones delivered with your system are WinXP drivers and not suitable to use in Windows ME.