IFSHLP.SYS was originally created during the implementation of OS/2 1.2, and later released in Windows 3.11 running on 32-bit 386 Enhanced Mode.
Its job was to provide 32-bit file access (bypassing 16-bit DOS file IO mechanisms), and ensuring nothing else on the system could intercept INT 21h calls.
ME didn't depend on MS-DOS (though it did provide support for running MS-DOS apps).
Everyone's favorite error message: the Microsoft Installable File System Manager cannot find the helper driver. Please ensure that IFSHLP.SYS has been installed.
This means Windows ME needs a real mode DOS helper for certain file system operations.
I can't remember whether the INT 21h function 55h (Create PSP) was still called as frequently as in earlier Windows and handled in DOS but I betcha.