A totally random shot:

Difficulty occasionally occurs with newly formatted hard drives where drivers necessary for a "boot from CD" have not been installed by the BIOS and system startup portion of the boot. Usually if the WinXP CD starts the boot, it will provide the necessary drivers to continue; but some older machines have a problem with getting the CD reader fully up. You can download a "boot disk" set using the link from How to obtain Windows XP Setup boot disks. The download is one executable file that unpacks to 6 floppy disks. The floppy disks can be used to boot the machine and transfer to the WinXP setup CD. (It says so in the article at the link.) There are separate download links for WinXP Pro and WinXP Home, and for each of the basic, SP-1, and SP-2 variants, so you'll need to know which flavor of WinXP you've got.

I don't really think this is going to help in the current situation; but it may be nice to know it's around later - or for someone else's problems.

John