Ancient operating systems

I've been bored lately and have taken to dusting off old OS discs and installing them in a virtual machine. However I ran into a little hitch installing Windows ME during the setup process. For the life of me, I couldn't get the install disk tools to format C:\ without problems.

To resolve the issue I had to mount the vdmk in windows, format to FAT32 in the host OS, then relaunch setup. Seemed to work flawlessly! I've tried replicating the issue and I have yet to get WinME tools to format the vdmk or even begin setup without doing this.