The ways described above are fine, but there's a quicker, easier way (and takes only 1.5MB of downloads).
First, go here and download Nlite:
http://www.nliteos.com/
It's a great little app for customizing your XP install, but we're going to use it's nifty little feature to create bootable images
So, now for the procedure:
Copy the whole XP CD's contents to some folder on your harddrive.
Run Nlite, choose option 'Create Bootable ISO', dont touch anything,
click next, name your iso, click Save.
Thats all there is to it, very fast and very easy!
Now open any burning program and burn the ISO.