this combination (Win ME and Win NT) is highly unrecommended. Not even Win
ME is the worst OS Microsoft made during last ten years (from multi OS
configuration point of view) but also its requirements and requirements for
Win NT are practically opposite.

The main problem is, that there is no choice to what partition you will
install WinME - it is always system partition of system primary disk. But
Win ME is too big to be installed and run smoothly inside <=2GB FAT16 system
partition, required by Win NT. It is because Win ME is not able to use NTFS
partitions and Win NT is not able to use FAT32 partitions, but both systems
should access system partition (and it is cause of your setup failure). The
only filesystem these two systems can share is FAT16, but it is limited to
2GB size by specification. Win NT is able to maintain FAT16 partitions up to
physical limits of FAT 16 parameters - ie. 4GB, and other OSes (including
WinME) are able to read and write data on such partitions, but they may not
run maintenance tools on such partitions, otherwise there is high risk of
filesystem corruption. And  WinME is running such kind of tools
automatically on system partition...