At a quick guess it could be a hard drive problem.
Go into BIOS (F2 or DEL upon boot) and see if its detecting the Hard disk ok. Also listen when the laptop is booting for 'clicking' or 'spinning' noises.
If you hear a clicking or grinding noise its a new drive. Not all that uncommon and easy enough to change.
If your confident enough remove the hard disk drive and see if XP will boot from CD then. If it get to install process ok there is your answer. It may well be the hard drive is not being detected by BIOS and therefore is jamming the machine at POST (power on self test)
Philbert, August 2007