The POST BIOS test is nothing but a very crude counting of fingers and toes. It does nothing to establish memory integrity & mostly just wastes time. Select "Quick Boot" or whatever your BIOS calls it.
Possibly:
1) Corrupted BIOS - see if you can get an update and flash it (save the original!)
2) Duff memory - try reseating the SIMMS or having them checked.
3) WinME - which I don't know (SE for me) but about which I hear little good. Sounds like the self-repair feature is noticing something that it thinks is amiss in AUTOEXEC and stuffing in random garbage.
4) Maybe ME doesn't like LILO? Maybe ME doesn't like a dual-boot AUTOEXEC/CONFIG? I hear that ME doesn't take kindly to any other OS being around. And will ME (with all it's system self repair files) fit into 1.97GB (I presume you don't mean Mb)?
5) Try another boot manager (you may have to do a "Format/MBR" to remove LiLO)