OK. I think I remember the issues here - and there were two issues that occurred concurrently and clouded things up a bit.
Newer 80 track 3 1/2 floppy drives may have a narrower head gap than older 40/80 track drives from the mid nineties. Therefore, it is necessary to do a full format of the disks on the new machine before inserting them in the old machine for saving backups from UFT.
Second, WinME changed the dos functionality from what it had been in the Win 3.1,95,98 operating systems and this caused a different usage problem. It took a while for users who bought new Win ME machines with that supported only 80 track narrow head gap to figure out that they had two separate problems affecting their little floppy drives.