First you should not have your hard drive connected at any time to the same cable as your DVD drive or your CD-R as it can cause data transfer problems you shoud have three connections on your mobo one for your Hard drive the other for your DVD rom drive the other for the floppy drive.
If you have a floppy ME start up disk boot with this choose install without cd support it will take you to dos and A:/ will appear type in fdisk and delete the none dos partition or if there is nothing to delete go to delete the prime dos partition i do not no what OS is on the HD all data on your hard drive has been deleted.
Go into bios and change to first boot cd rom put your XP into disk drive reboot choose advance and choose a new install XP will format and reinstall.
Is your 120gb HD working with your MOBO as it seems a big jump from 40gb to 120gb they are not plug and play do's it match your MOBO spec??
Your DVD drive should be set to master and your CD-R should be set to slave.