If you boot to the XP disc, and then attempt to remove the exisiting partition, in order to install a new partition, and it cannot complete that task, either the Windows install CD is bad, or the hard drive is likely bad.
If the drive is over 3 years old, it could be bad. If it is five years old, it is very likely that it is bad.
The first clue is whether it can partition and format the drive...
Luckily, hard drives are so very inexpensive now... not that every $40 to $50 purchase is not difficult for huge numbers of computer folks.