If you are booting from the cd just select the partition that already has XP and it will reinstall over the previous install. But from the sounds of it you are inserting the cd in xp and you should just select install XP. It will not format your hdd unless you select advanced from the pop down menu. But if your XP cd is pre sp2 and you already have sp2 installed on the curent install you won't be able to install sp1 over it. You will get an error message saying the copy of xp you are trying to install is older than the current install. To overcome this you will need to remove sp2 from the add/remove program list. But it would be much easier to just boot from the cd and select the partition that already has xp on it and do it that way.
Ok but don't forget it is "ALWAYS" better to just do a format and a fresh install. Back up your data and do a fresh install.