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Hi tap. Yes installing Windows XP onto a system with Windows ME installed is do able. Do you want to have both Windows XP and ME running on the same computer or do you want to upgrade Windows ME to Windows XP? IMO I would save whatever data is on your computer now, format the drive and install a fresh copy of Windows XP because Windows ME is highly unstable and has always caused problems for me whenever I used it.
Depending on hard drive size,You can use Partition Magic to shrink down main partition,then create partition number 2 and then install XP on partition E: or F;..