ughh....please stay away from ME, there is a reason it didn't stick around for long. And Microsoft hardly acknowledges it's existence. I seen a timeline they had once, and it showed every OS they've had except ME?? Interesting to say the least.
Anyway, I also don't suggest XP on such a slow machine, one of my old machines had a 700mhz Celeron with 512mb RAM and its pretty slow, not totally unusable but it can be annoying at times. XP is just a more demanding OS and older systems have a hard time with it, I would suggest not having any less than 256mb of RAM honestly.
On your older machine I would say stick with 98, if you want to run XP get a better computer, but as always, it's up to you. I just had to speak up about ME though because that is such a horrible version of windows that its not funny.