David, are you using the original Compaq CD or is it your own copy of XP?
If you use the Compaq CD it will do everything for you and take care of all the partitioning automatically unless they give you some sort of drive parameters but they usually will not.
If you're using your own XP disk then you can erase partitions as you wish at the formatting window in the XP CD boot menu and decide to quick or full format.
All of the problems may be exacerbated by a damaged disk.
Where does the XP installation crash?
E-mail me and I can walk you through it.
