Use another PC.
Go to
www.bootdisk.com and get the file to make a boot-floppy for W98-SE. Create the floppy by running this program.
You can buy 2.5"-3.5" adapters. Take the laptop-hd out, connect it temporarily to this other PC as Master and disconnect any other HDs. Make 2 partitions on the Laptop HD, the first one of max. 30GB (and set it active). Format this in FAT32 using format C: /s /u, the second partition uses the rest of the HD, format also in FAT32. For both, use the W98 floppy.
Remove the floppy and try to boot that PC. It should boot into C:.
Now connect the original PC-HD back on, and make that laptop-HD the slave. Boot up.
Then copy the full contents of the XP-CD to the SECOND partition of the laptop-HD.
Take the laptop-HD out, set jumpers back to master and put it back in the laptop.
It should boot the laptop into C:. Then go to the laptop's second partition and start XP installation from there (setup.exe most likely). Let XP re-format the C-partition as NTFS. Keep the second partition with XP-files for when you need to (re-)install, and store your updates and other stuff there....
good luck!!!!!