So the XP CD doesn't even boot into the Recovery Console?
It doesn't need to copy files to HD in order to load that Console.
Also, please download, burn and run the following bootable CDs:
Parted magic:
www.partedmagic.comUBCD 5:
http://ubcd3.myubcd.com/ubcd50RC1.isoRun diagnostics and info tools, see if you can find out something about that system and its HDD.
In particular, run GParted (partitioning icon on desktop) in Parted Magic and check whether the HDD is really empty and clean.
Then, from Parted Magic as well, run TestDisk (
http://www.cgsecurity.org/wiki/Running_TestDisk). See if you can find something out about the disk geometry and the boot sector. In particular, run the "Ntfs: Boot and MFT repair", also use TestDisk to rewrite the MBR (which is the same as using FIXMBR).