Sounds like the CD drive is not set to forst boot device.
Enter BIOS setup when you boot computer. (hit DEL, F12, whatever key your system says, hit ".." to setup)
Check that the CD drive is first in boot order, under the boot options menu.
Save and restart with Win XP disc in the drive. You shuld now see a brief message hit any key to boot to CD...
This should get the Win XP setup disc booted, where you can format (erase, choose NTFS) the drive and install XP.
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