|Your install CD evidently doesn't include any service packs. |
To get the benefits of the SATA drive you MAY need to install SATA drivers during the installation of WinXP.
You have a couple of options. To access the remainder of your hard drive space go to Disk Management. You should see the remainder as unallocated, now that you have SP2 installed.
If you want to have the entire space as one partition, which I don't recommend, then you will either need to partition and format the unallocated space and then use a partitioning software to merge the partitions.
OR, you could slipstream the service packs and the SATA drivers into your CD files using nlite.
I don't know what BIOS settings options you have. If you have AHCI then you would use that to get the full potential of your SATA drive. If you don't have the option for AHCI then one of the RAID settings may be necessary. I think that right now you are running in a IDE compatibility mode.
Read the first couple of paragraphs in the link below. Should be helpful as you are probably using an Intel based MBoard.