First, make sure that they don't have any data that they want to keep. If you format and install over the current installation, you will lose EVERYTHING you had on the partition that XP is currently installed on.
When you are ready to do this, first place the CD in the drive and reboot. If the CD is bootable and the boot order is set to boot from CD-ROM before the Hard Drive then you should be drawn into the beginning of the install process.
Agree to the end-user license agreement and go through the prompts. You should eventually be asked to choose an install location. You will have to follow the prompts to re-format and install over the previous installation. This is fine because the operation reformats the drive prior to installing a new copy of XP.