I don’t think the problem is the hard drive.
Does the BIOS see the hard drive and the dvd drive during bootup?
Try download a windows 98 boot disk from
www.bootdisk.com.
Boot from the floppy with cd rom support and the windows xp cd in, at the command prompt type:
D: and press enter
You will either access the windows cd or get an error, tell me which one.