mmm - if you UPGRADE the current ME installation... it will NOT erase/lose everything on the drive - unless you're more than a little careless...
You can upgrade ME to XP - and have the opption to revert to ME if you wish to. You can parallel install XP alongside ME - a dual-boot; but XP is not very happy at sharing its partition with another OS - but will happpily share the drive with other OS - as long as each is in its own partition (In a dual-boot you would have both OS available - and could dump either later...)
Or go for a fresh/full installation - not an upgrade; and XP will be the only OS at the end; means you wipe the drive in the process...
But several issues to be aware of first regardless of path you choose...
Have a good read of the info at the links below; it's all there
http://support.microsoft.com/kb/316941
http://reviews.zdnet.co.uk/software...
http://www.winsupersite.com/showcas...
Regardless of how you go about - a true upgrade or fresh start (as in erase everything and install XP as a clean install) back up your data etc. first. This means copy it (off the system entirely) to optical media; verify those copies are truly readable etc. on both the system as is (which made them) and ideally at least on other...
Then ensure your system is OK for XP to install properly etc... There is an XP readiness advisor/util; sometimes on the CD sometimes not...? This link discusses that aspect etc...
http://pcpitstop.com/xpready/upgrad...
Once you're "sure" it will all go OK... follow the above tutorials to upgrade etc...