At the Microsoft Advanced Search my selection of WinXP for product and search for "Installation Stops" brings up several things that might be applicable, but none that are sure-fire hits.

Setup stops responding or displays an unrecoverable error message gives some generic sorts of "what to do" suggestions. The focus of this article is on the stoppage that "… typically occurs during the last 30 minutes of installation, when devices are detected and drivers are installed." This sounds somewhat like what you're experiencing, and the suggestion is that your BIOS and/or some installed components may not meet WinXP requirements. The article says you can check the "Hardware Compatibility List" but all the links given are "dead" and so far as I can determine no such list is currently available.

With a machine that was originally built for Win98, it's possible that even with current BIOS reloads the BIOS itself doesn't meet WinXP requirements. You may also have older ISA adapters that don't conform.(?) Step 5 of the above article does give some suggestions you can look at; but you'll have to figure out which may apply to your case.

If your WinXP CD includes SP-1, and if you're using a USB mouse or keyboard there's a known bug that may "terminate" an installation. The bug was fixed if your disk includes SP-2, and shouldn't be there if it doesn't include SP-1. There's a hotfix if you have an SP-1 version, at Windows XP SP1 Installation Stops Responding with About 34 Minutes Remaining. Getting, and streaming the hotfix into Setup, is complex. It might be simpler, if possible, just to get rid of the USB devices until after you get intalled and can update - if it applies.

I'm still puzzled too.

John