Does the setup see any other partitions on the hard drive?
for example there is c:, d:, e:, but it just can't recognize the system partition and cannot find a operating system there.
Maybe some specific programs that would be able to rescure the files off of the drive, to another hard drive (or even flash drive)?
the ghin is - the most programs that do this sort of thing - require you to have a working operating system.
If you have no other harddirve , ... well.
Basically every Linux destribution has it's liveCD ( a cd that you can boot from and work, including browsing inet, just line normal system that's installed on your hdd.) You have Slax (slackware livecd,) Ubuntu livecd, and many others. All these live cd's don't require harddisk at all.
I even came across such livecd of WinXP (custom-made of course) which fully boots winxp off cd, and has pre-installed utitilities for fixing various problems - this is for exact situations that you're into.
I don't remember how this winxp livecd is called, I don't use xp, so i throwed it away long time ago :-(.
Anyway, you can find a lot of recovery tools both for windows and for linux by googling.. You need to boot from a live cd (again, either windows or linux), or if you have another harddrive- install another instance of XP there, and than fix your primary xp boot partition.