I never really understoode ME. Win 98SE and XP, no problem. ME is like the red headed stepchild in the Windows family. Everything that I had working fine under 98SE seemed hit or miss on ME. I couldn't even get Internet Connection Sharing working on ME. Even when I got to the point of using the step by step idiot guides. This was no problem under 98SE. Oh, and then there were the driver issues. I eventually just rolled back to 98SE.
Like the other have mentioned, the password thing is just a nonissue. I wouldn't worry about it. I had the same thing happen when I breifly had ME installed some years ago. As long as the computer is acting weird after the inital startup; can get online and programs run normally, I wouldn't worry too much.