If it was a setup you would need IDE/SATA drivers but it isn't. The only thing I could think to do is keep pressing F8 during BIOS and startup to see if it even gets as far as windows startup options. But the fact that it tells you test failed //2-7 means its loaded some data from the drive so I don't think its hardware. Try booting from your XP install cd (F12) and goto repair installation...

Hope this helps