How do you start in MS DOS mode from Windows XP?
Windows XP does not use MS DOS and thus does not have a DOS boot mode. The Windows Setup disc has the ability to delete the harddrive partition, but it sounds like the setup program is not loading properly and IMHO that’s probably hardware related. Try disconnecting anything you don’t absolutely need, or that didn’t come with the computer when you bought it. (Assuming it’s an off the shelf system.