Ok, for a start you cannot use the XP cd that came with your other pc. You must buy a separate upgrade disc, either Home or Professional.
Also I do not understand what you mean by ME Upgrade. you do not need to do anything with ME. Just insert your new XP disc when purchased and when the options appear choose to upgrade. XP will install. You can choose at the outset to receive a hardware report. If anything is incompatible with XP and needs upgrading, or later drivers, this will tell you. Modems are a favourite here.