Put the XP cd in the drive and turn on the computer.
It should boot to the cd and give you the option to format and install.
If it doesn't work, you may need to change your bios so the cd is the first boot device.
I know some people say that it can encrypt your hard drive but.... I have used a Win95 bootdisk many times to do FDISK on XP machines with no problems.
If all else fails, just do FDISK using a WIN95 bootdisk. http://www.bootdisk.com/bootdisk.htm
Just don't use a Win95 disk to create partitions, as it will only creat partitions with a maximum of 2 gigabytes each. I've always used a Win98 boot disk, if for whatever reason I couldn't get the computer to boot off the CD.
Wipe out partitions with the 95 or 98 boot disk, and then boot to your XP CD to then create and format the partition(s).
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