It sounds like a Memory issue to me, if MS Messenger and Xolox can’t be run at the same time. How much RAM do you have? It’s best to have at least 128M of RAM just to run Xolox at peak efficiency.
I use a Windows ME too. I have found that a memory defrag program like MemTurbo, RamPage, RAMbooster, or others makes WinME run a lot better. I have 768M of RAM now, and I still use MemTurbo to keep my system running smoothly. Most of the available memory recovery (RAM defrag) programs are free, and the ones that aren’t should be.

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With Desperation comes Inspiration.