|First you cannot format your C: (OS) drive while the OS (Windows) is running. That is why you get the error message.|
If you have an XP Install CD which is bootable and a CDROM/DVD Drive which is set in BIOS to be ahead of the hard disk in boot order than all you need to do is stick the CDROM in to your optical drive and turn your PC on.
See here for detail:
If you do reformat your disk then you will loose all data. Therefore you should be thinking about backing up your valuable bookmarks, email and other data before going down that route.
Also if this is an OEM PC then you may have a recovery partition on it which may allow you to recover to factory defaults (i.e. to how it was on the day you bought it). This is the better route to take if you have this option available.
Finally you may also need to know your licence key (C.O.A). This is normally on a sticky label on the bottom of a laptop or on the side of a desktop. However, if the install is an OEM SLP install then the C.O.A. in use will not be the one on the sticky label but a Volume Licence OEM key which you will have to make a note of.
There is a utility keyfinder which you can download to read the key you have in use before you do a reformat. You can get this utility form:
☺ When everything else fails, read the instructions.