I had exactly the same problem mate. Built a PC and it would not read XP. Took it to work and it worked fine. Then tried installing server 2003 which went on fine but wouldnt give you the option to install XP even when you explored the disk. The Install button at the top of the 3 options was disabled.

To get round it I tried installing 2000 which worked but again no luck with exploring the XP disk. I left 2000 on there, took the hard drive to work and plugged it into my work PC. I installed it that way then took the hard disk home and installed the remaining drivers for my hardware.

I have never come accross this before and work in IT and not too many people I asked had either.

By the way it wasnt a different XP disk issue as I tried several

HTH