it's been a while since XP for me. But I distinctly remember it for the first time for a windows edition to have the option to do a fresh install w/o the disc.
I don't remember if it has the option that Vista has that when you do a fresh install it puts your former files into the (windows.old) folder, so obviously you will need to do a backup of your personal files, unless XP does have a similar feature.
If you are not pretty familiar with this process, given the millions of different PC setups out there, you may or may not experience problems. I won't list them because there are too many variations, but a standard system with decent specs shouldn't have much prob. I do a fresh install of my Vista no less than every 90 days, but i enjoy streamlining my system.
This is a smart idea if your PC is kinda out-dated -
http://support.microsoft.com/default.aspx?scid=kb;en-us;Q310994 - download bootable disc
Another important thing to know about your XP version - Home or Professional - also which type to install FAT32 and NTFS. you'll need to know in advance.
Ensure you install to C: drive.
Make sure you have your Windows product key/serial number. - otherwise your windows will expire after 30 days and the system will be unusable w/o the code number
you will have 2 choices now, without the CDROM of XP you can
1. Click on My Computer then C: - WINDOWS - i386 - winnt32.exe. This is the a part where a lot of people get confused. They realize that a copy of their Windows XP CD is here, but they look for the wrong files. Most people will try to find a file named "Setup", "Install", or "Windows". The file you are looking for is called "winnt32.exe".
or
(this was my preferred method)
2. Find the option to do a reinstallation ( cannot remember how to do it as it has been years, but it was quite simple. If you know someone familiar with XP reinstalls then if they know what they are doing there is a neat little screen to choose the option to reinstall the OS w/o a disc. ( I used to do this all the time)
once you've done the fresh install and are back to square one (hopefully you had all your required drivers for components, if not time to start downloading, that is if you have internet access for the PC in question) once you get SP2 - use this to optimize your system -
http://www.microsoft.com/downloads/details.aspx?FamilyID=68C48DAD-BC34-40BE-8D85-6BB4F56F5110&displaylang=enEnjoy your freshly installed OS !!!