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
Hope this helps...