If you had XP on there before then indeed it probebly wont be a compatibility issue. But space might be a problem but i would think (hope) windows would be smart enough to check if you have enough free space.
If you upgrade from ME to XP you need alot free space to copy all youre documents and installed programs before the installation even starts.
Upgrading Windows 9x/Me to Windows XP is actually a bit of a misnomer. When you upgrade such a system, Microsoft actually examines your installation, moves your documents and personalized settings to a backup location, and then performs a clean install of XP. Then, it goes back and applies those personalized settings to the new OS and moves your documents into the correct location (My Documents, which is located in a different place in XP than it was in 9x/Me). This is why it requires so much free space for the upgrade, by the way.
http://www.winsupersite.com/showcase..._9xupgrade.asp