You all seem to be mucking this up pretty bad, so I'll straighten a few things out.
Win95, Win98, and Win98SE had full versions of MS-DOS still running underneath the operating system. This is how you were able to restart to native MS-DOS mode on these OS's and run all of these older games just fine.
WinME does still have some DOS under it, but it is severely stripped down. The DOS under WinME runs in protected mode only. It does NOT have real mode DOS capabilities (although there is a hack to change this). This is why you can't shutdown WinME and get to a plain DOS prompt and why you can't get old DOS games to run.
WinXP, like Win2K and WinNT, has NO DOS structure underneath it at all. There is no DOS in these operating systems period. You can access a virtual command prompt that similates and acts like DOS from within Windows, but it is NOT DOS. WinXP is the replacement for both Win2K and WinME. There will never be a Win9X based system ever again. WinXP takes all of the stability and robustness of Win2K and greatly improves the compatibility with programs to near that of WinME.