I assume the XP home is on a CD, how are you going to transfer it to the harddrive without a DVD /CD reader?.
The problem with copying a protected CD is that not files will be copied in normal use.
Use a program like CDCHECK
and use the recovery option to copy the whole of the disk to a memory stick.You should then be able to go into BIOS and set the boot order to USB drive first. On the first reboot during installation you may to change to boot from harddrive (from Bios setting) or it may do it automaticly
This trick will not work in windows 7 as it will not boot from an external drive.