It's not clear from your post if you can boot to the C: prompt from the hard drive. If you can, go to step B.
If not, get a hold of a windows 98 boot floppy (go here to get one:
http://www.bootdisk.com/bootdisk.htm ), boot from it and run format c: /sys
That will format your hard drive and make it bootable.
Step B. At this point, find the driver disk for your PCMICA drive, which should have a DOS driver install program on it (at least mine did) that will automatically edit your config.sys file, etc. to make the drive recognizable when you boot to DOS (the C: prompt). If the driver disk doesn't have the setup or install program on it, you'll have to copy the driver(s) to the C: drive and edit the config.sys file manually. Here's an article that explains that:
http://www.everythingcomputers.com/wind ... t_disk.htm
Then try booting to the C: prompt, find the CD drive, navigate to the i386 directory on the WinXP disk, and execute the program winnt.exe that resides in there. That should copy the XP install files to your hard drive and start the install process. (To navigate in DOS, usually you'd just use the following commands to work your way through the maze...
C: [then hit ENTER to switch drives, e.g. D: to switch to D drive]
cd.. [then hit ENTER to navigate to the parent folder]
dir/w/p [then hit ENTER to list all containing directories page by page]
cd <type_directory_name> [then hit ENTER to navigate into the chosen )directory]
If that doesn't work, you'll have to manually copy the i386 folder to your hard drive, and run winnt.exe from there.
I don't believe there is any way you can make your PCMCIA CD drive the boot drive, so you can't install XP by booting from the CD.
You should really max out the RAM on the machine if you want to run XP, by the way.