#1, you wont be able to install XP over ME unless its the HOME version. #2, it is HIGHLY recommended that you either do a dual boot or do a clean install. The reason for this is that you'll have a lot less problems than if you do this.
You wont be able to get rid of the screen easily. You may be able to change a boot record or something, but Im not sure. The other alternative is to reformat your hard drive.
Also, which beta is it? There are several out, and that will help us out too.
Unless XP completes the setup, you cant do anything about that OS choosing screen, called a bootloader. If you did, Id put up how to do it, but since you dont, it wont help you any.