Yes it is possible to upgrade a WinME install to Win2000. I know because I have done it before. I did this just to see what would happen. When you pop the Win2k CD in on a WinME system it will ask you if you wanna upgrade, click yes and off it goes. No need to do anything else really. I think Win2k will treat as 98. However, once you boot Win2k you will notice a lot of QUIRKS! For one the taskbar properties will have all of Win2k's customization options as well as all of WinMe's. Yes there are lots of duplicate options. The "Effects" tab in Display is completely messed up with all of the icons named differently. [The recycle bins were named My Network Places]. Most of the shell icons are screwed as well due to lack of knowledge of Winme system files. Control Panel on start menu, is a paper document. Some other problems include less stability [the system crashed a lot], and some filenames were truncated to DOS names, and some programs pointed to wrong .dll files.
It works but it isn't recommended. If you are going to update, uninstall all updated drivers, use default WinME drivers, uninstall some Win9x dependent software, and hope.