Here is a step by step guide to installing Windows XP.
http://www.winsupersite.com/showcase/windowsxp _sg_clean.asp
Near the start of the install make sure you chose to "set up Windows" as that will do a full install. Dont chose "Repair" as that just does a tidy up.
Note step 5 (of the step by step install process not the pre installation checklist).
Step 5 is called Choose an Installation partition.
At this point I would DELETE the partition (with a D) - you may need to press others keys to confirm it.
Then when prompted say you want to CREATE a partition (make it all the disk).
You will then be asked if you want to format the partition, say Yes.
At the end of the format the Windows install will continue.