set your first boot device to cd-rom in the bios,you can do this, by pressing del key at bootup .put the xp cd in the cd-rom drive and press any key when prompted to boot from xp cd.this will load the installation, and just follow the prompts.
As above ...but even for a home PC I would create one partition of about 2/3rds of the Drive during setup for the Operating system and when in windows use the disk manager to create a second partition for storage.
1) if you haven't bought your XP program yet - go for Pro. More expensive true, but more options.
2) I would still partition my drive for 2 reasons. a) backup b) defragging
There are two schools of thought on partitioning. One lot says make a smallish (5-7GB) C: drive and have ONLY your OS and a few essentials on it - putting all other programs onto a seprate partition. The others say 1 big inital partition with all programs and a another for data files only.
I have 3 using second school of thought + a separate drive for my Winswap (pagefile.sys in XP)file
NTFS on one partition will work fine and is the simplest way to do things.
Depending on the size of the hard drive and the number of programs then you may wish to partition it. Putting user created data on a seperate partition is often a good idea as you can format the main partition without worrying about your data being lost. Of course you would have it backed up so it wouldn't matter.
Never understood the reason for putting the OS on one partition and the rest of your apps. on another. If you format the OS partition you have to re-install everything again anyway.