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XP Pro on VM?

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OH Smeg

Is the data side of the disc clean?

Are there any marks that are not actually on the Disc Surface showing on the Data Side of the Disc?

Is this a Manufactured or Recorded Disc?

Is this Disc a M$ Branded Install Disc or a System Makers Recovery Disc?

However generally speaking Windows Installer Hanging up being unable to locate Files is a sign of Timing Issues with RAM which only affects the Install Procedure not the actual running of the system once you get Windows Installed.

Have you tried coping the Install Disc to a USB Thumb Drive and installing it that way?