There are a few ways you could do it...
Heres my way:-
BOOT from the Windows XP CD > Delete the partition that XP is on > Create a new partition > You can create more than two more partitions just using the CD itself > Format the drive(s) > Put a fresh install of XP on the new partition > Then go through installation, setup and then finally the activation.
Now Install Partiton magic > Do what you want with that.
Now install Windows XP office.
Then install all of your other programs.
However my way requires backup of pictures, documents etc before you could start as you are totally formatting the drive.
If you say you have prolonged problems, this may be the best way.
I'm not sure on question 7 -