It was a wonderful operating system. It provided consumer desktop essentials (Plug & Play, DirectX 7, ACPI power management, Windows Driver Model (WDM), and support for consumer I/O interfaces like USB and Firewire) alongside a modernized UI, all running atop the NT kernel. I was extremely lucky to receive a free copy of Windows 2000 Pro as a student, because I rode that horse for years.
Then Microsoft added a green start button and dark blue backgrounds and packaged Win2k for home users as Windows XP.
Windows ME on the other hand...
It's been 20+ years so it's possible I had it wrong then, or remember it wrong now.
You would often get audio buffer underuns on the startup sound, if enabled, especially if you had auto login.
XP contained a lot more than just theme changes. XP solved a lot of compatibility issues that Win2k still had at the time. Running 2000 applications on XP would be nearly guaranteed to work, but Microsoft needed to also get Windows Me/98/95 games and applications to run for consumers.
XP brought a few general improvements such as ClearType and the ability to revert driver updates (which Windows users are still unable to find these days, leading to the "I have to uninstall updates every week or my weird USB keyboard breaks" rants online).
Everything Windows 2000 did good, XP did as good or better. The biggest difference was the UI, but the "classic" theme stuck around until at least Windows 7.
DOS-based Windows had two main things going for it at the time, for users: It could run on average computers, and as you mentioned it could run most DOS software - most worked from Windows and all by simply stopping at DOS in the boot process (I almost always did the latter, I had no excess performance to give away).
Probably very few people switched from Windows 98 to Windows 2000. That wasn't considered an upgrade path. That was installing a different operating system.
Technically Windows ME existed, I guess.
Whether or not many people would want to do that upgrade/migration is another question, but similar to you I doubt the number was high.
I was one of them. I went from ME to 2k and it was definitely a big step up.
As I used to be big into UNIX in the early 2000's, I used to dual boot between it and Red-Hat, eventually I got fed up dual booting all the time depending on the project work, or client support, and ended up using Windows, alongside Humming Bird X Server to connect to our development servers (yep back when we were still time-sharing UNIX servers for coding tasks).