Alright, I would quit, restart, and when your computer boots to the XP disk, select to do a fresh install of windows.
It will then come up to a screen that asks you which partition you want to install windows to. There should be an option to delete partitions (look around, you hit the D key or something) and then it asks if you're sure, yes you are, hit L (or whatever key) Delete all the partitions on your hard drive until you see no partition, it should just say 38GB unpartitioned space. This is what you want, have windows install to this. It will have to format it, never do a quick format. Have it format in NTFS. If you need further help I'll be on AIM and MSN for a little while longer.