system boot failure, please insert systen disk....NOOOOOOO

I know that you said, "...all basic resolutions have been tried," but I don't know what that means for you.

Were there any other error messages? Is the BIOS set to boot from CD first? Did you re-seat the CD and try to continue? Is the CD scratched or "dirty"? (Always wipe CDs with a very soft cotton cloth, starting at the center of the CD and wiping radially outwards.)

You will have to delete the existing Partitions.

Boot the computer with the XP CD in the drive and allow setup to begin. When the screen appears showing the existing partitions and unpartitioned space available on the computer you should see a drive listed in the lower portion of the screen. Now you'll see all the partitions listed that are currently on the drive. To delete all the existing partitions hit the 'D' key followed by the 'L' key. The screen instructions will be visible to guide you through the process.

Once all the existing partitions are deleted the display will show the total unpartitioned disk space.
If you only want one partition then hit enter and the entire disk space will be allocated to a single partition and you'll be taken to a screen where you select a file system.

Do you have SCSI drives and if so do you load the drivers when ask to?
It will ask you to press F6 to load the drivers.
If that is not the problem then depending on what type of computer you have, like a Dell or HP you can try the diagnostics that are in the bios.
Hit the key that will take you in to the BIOS when prompted. Like F2 or F10 look at the boot up and see what will get you in to the setup.
Your hard drive could be bad.