Ensure you do your reinstall from a Windows CD that has Service Pack 3 slipstreamed into it. You can make one of these using NLite - I recommend against using it to remove any Windows features from the CD though.
Another thing you might want to do is boot your XP CD to the Recovery Console. Then from there, fully format the hard drive and use CHKDSK /R to check it is actually OK.
If you still have no joy, try different CD Media or even a separate USB CD drive. The Windows setup routine can be a bit picky about which drives and media it likes.