I'd guess that if you're running Win98, then your machine may just be old enough to not support booting from the CD-ROM.
That being the case, you'll need a Win98 boot floppy disk to boot to DOS prompt and format C:\
Before you rush off and do that though, you need to visit the following URL and download the relevant boot disk creator ;
http://support.microsoft.com/default.aspx?scid=kb;[LN];310994
Once downloaded, just run the exe to create your XP boot disk set. You will need half a dozen blank floppy disks to create the set and will then re-boot with the first of these in your drive (borrow the XP CD from yer Ma & Pa again)
Note to SUP2069: Even if you have lost the SID to access a previous NTFS drive it is very easy to get your files back. I installed XP onto a FAT32 drive and lost access to a previous NT4 NTFS partition (silly me). Simply run the BACKUP util under XP and backup the NTFS drive to someplace on your FAT 32 partition. Then reformat the NTFS party so you can access it and restore your backup. As the BACKUP app runs as a member of the Backup Operators group it ignores file/folder/drive security permissions that may have been assigned on NTFS drives.
Hope all your woes disappear....