I don't see how one can install win2k over XP, or vice versa for that matter, without losing all application settings.
I have installed win2k many times and have never seen any option to pick up old app settings. Maybe there is something I have been missing all along
The last time I saw the option to pick up previous app settings was installing windows NT4 over windows 3.1, and that worked sort of OK because most 3.x apps didn't use the registry.