First you must find out which is your live boot entry. It is most likely this one
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="Microsoft Windows XP Professional" /noexecute=optin /fastdetect.
Now we must edit out the bad entry. It is not viewable by default. You must go into the control panel>folder options>view>and uncheck hide protected operating system files.
Now go into my computer then your C:\ you will see the file boot.ini. Double click on it and delete the entry you dont need then save it. This should eliminate the boot option window when the computer boots. Most likely your old system folder is still there though which you can delete if you dont need it anymore.