I upgraded XP from 2000 here on a ThinkPad 770X (PII-300, 128MB RAM at time, 8 GB HD, Xircom Ethernet/Modem) and it went OK. Even Mediamatics DVD Express worked.
However, there were many issues with COM object registration, seeing how everything critical is a COM object in XP, and how there were a lot of internal dependencies that just sucked ass.
Gradually, the system degraded into a mess and I had to reformat the HD.
Plus, the IE used in XP/2K/NT and the one in 9X/Me are actually two different executables, each with their own suite of COM objects and own version of WININET.DLL (the main networking DLL for all happy TCP/IP functions in 9X/Me).
Since half the OS is based off of Internet Explorer DLL's, you're going to have some problems
.
Bottom Line: NEVER upgrade a Win 9X system to XP or 2000. You will pay for it later. It will hate you.
If you don't want to format the HD, install XP into C:\WINNT51. After all, that is what it is!
Mitch