XP INSTALL OVER ME

I have a PC currently that has Win ME on it but when it boots its giving a lot of VXD Blue Screen errors which I can’t solve so the only way I can boot into ME is in Safe Mode (with the kboard not working!)

I have Win XP which I want to install over the top of ME so I can keep my application settings etc. I can’t boot from the XP CD to install and when I try and run the XP setup.exe from the CD it can’t be run in DOS mode.
Does anyone have any recommendations how to get XP installed on thePC but leave the applications and settings intact?