|"Setup did not find any hard disk drives installed in your computer."|
You get that message if the bios Setup of the computer has the mboard's SATA controller(s) in SATA mode or similar (e.g. AHCI mode), because XP has few if any built in SATA controller drivers.
If Setup can't recognize the SATA controller(s) it can't recognize a SATA drive either.
If you had continued on with Setup, it would not have found the SATA drive either.
"You missed hitting F6 when it appears in the lower left corner to then add the hd controller driver. No driver no disk found"
That's probably not do-able if your laptop does not have a legacy floppy drive.
At that early point in Setup, XP (and 2000) only recognizes a few usb floppy drive models, most of which have not been made for years, and Setup can't recognize drivers for controllers on hard drives, CD or DVD drives, USB flash drives, or external drives. It can only find driver files on a floppy disk.
If you set the bios Setup of the computer so the SATA controller(s) are in IDE compatible mode or similar, the SATA controller and the SATA drive will be detected fine by Setup in SATA mode or similar, as IDE compatible devices.
IDE compatible mode - a.k.a ATA mode, EIDE mode, compatibilty mode, etc.
"To remove the windows7 boot loader you would have to do a repair install of xp"
I doubt you have to do that.
If you did delete the correct partition, you probably don't need to do an XP Repair installation procedure.
Set the bios so so the SATA controller(s) are in IDE compatible mode or similar, save bios settings.
If you have a hard drive larger than 137gb manufacturer's size, the XP CD must have SP1 updates included, or later. If it has SP2 or SP3 updates included, SP2 or SP3 is printed on the CD.
Boot the computer with the CD.
Let the files load.
Press R at the first full text screen to go to the Recovery Console.
you will see
If there are no asterisks beside password ("stars"; the uppercase of 8 on your keyboard) just press Enter.
If there are asterisks beside Password, the password is the same one you use for Administator in Safe mode in Windows, then press Enter.
Setup will look for Windows installations.
Each one found will start with a number.
Type the number, press Enter.
If there is only one Windows installation found, press 1, press Enter.
If there is more than one Windows installation found, press the number for the one the computer booted with before, press Enter. Usually that's 1 too, or the one on C:\Windows .
FIXMBR (press Enter) (answer Y for Yes)
FIXBOOT (Press Enter) (answer Y for Yes)
Type: BOOTCFG /rebuild (press Enter) (a space between BOOTCFG and /)
(this takes takes a few minutes)
8. At the command prompt, type bootcfg /rebuild, and then press ENTER. This command scans the hard disks of the computer for Windows XP, Microsoft Windows 2000, or Microsoft Windows NT installations, and then displays the results. Follow the instructions that appear on the screen to add the Windows installations to the Boot.ini file.
For example, follow these steps to add a Windows XP installation to the Boot.ini file:
a. When you receive a message that is similar to the following message, press Y:
Total Identified Windows Installs: 1
Add installation to boot list? (Yes/No/All)
b. You receive a message that is similar to the following message:
Enter Load Identifier (my note - type something or you will see no label when you boot)
This is normally the name of the operating system. When you receive this message, type the name of your operating system, and then press ENTER. This is either Microsoft Windows XP Professional or Microsoft Windows XP Home Edition.
c. You receive a message that is similar to the following:
Enter OS Load options
When you receive this message, type /fastdetect, and then press ENTER.
Note The instructions that appear on your screen may be different, depending on the configuration of your computer.
If there was more than one Windows installation detected on your computer, you will now see:
 D:\Windows (or similar)
Add installation to boot list? (Yes/No/All)
Repeat steps a, b, c for all Windows installations found.
If you are not sure what to type for Load Identifier, type any text - you can correct that later by editing boot.ini (see My Note: below).
If there was only one Windows installation detected on your computer, or if you have done a, b, c for all Windows installations found if there was more than one, continue with these instructions.
If any Windows installations are definately not XP or 2000, you don't need to enter anything in step c - just press Enter.
9. Type exit, and then press ENTER to quit Recovery Console.
Your computer will restart.
DO NOT press a key to boot from the XP CD
In this case, you may not get the choice of booting from one of two operating systems, in which case windows should boot without you seeing that.
If you DO get the choice of booting from one of two operating systems, the following assumes you did.
The updated boot list appears when you receive the "Please select the operating system to start" message.
Choose the TOP one.
Windows should boot normally.
Remove the Windows CD if it does.
Bootcfg does not delete the existing boot.ini - it adds one or more new entries that are listed before (above) the older ones.
You can remove the old entries, at least one of which may now be invalid.
Control Panel - System - Advanced - Startup and Recovery - Edit - you MUST maximize the window - delete the entire line(s) below the first line below [operating systems] that were not detected by bootcfg.
(e.g. if there only two lines below [operating systems], delete only the lower one)
Choose File in the top left corner - Save.
If after editing boot.ini there is now only one operating system listed after [operating systems] in boot.ini, after you reboot, your computer will now boot without prompting you to select operating systems.
"Will a repair install of xp remove all my files and programs? "
That's a pet peeve of mine.
People often call it that, but there is no such thing as a Repair install. That isn't what the text says in Setup
It's a Repair installation of your existing Windows installation - you're running Setup.
Microsoft has not used Install to install an operating system since the MsDos operating systems.
I prefer to call it a Repair Setup.
A Repair installation of Windows (Repair Setup) does not delete the contents of the partition Windows was installed on - all your personal settings and the data you have added to that partition will still be there, but it does delete and rebuild some Windows things that are essential for Windows to work properly.
However, NOTHING can go wrong while running it - you MUST complete Setup.
A Repair installation can't fix all problems, if they were not caused by things it can fix by using the XP CD's contents, but it's worth a try.
"Is this different than a clean install?"
A clean install, a.k.a. installing Windows from scratch, deletes everything on the partition Windows was installed on.
In either case, if you have other partitions, by default Setup does not delete the contents of those, but you can deliberately choose to do that before you install Windows on what will usually be the C partition.
If the partition you deleted is still un-allocated space....
You can software partition (e.g. NTFS) and format any un-allocated space on the hard drive after Setup has finished, in Disk Mangement.
You can't re-size or merge partitions in XP (or 2000) itself unless you delete the subject partitions and install Windows from scratch, but you CAN do that with third party partition manipulation programs.
E.g. a freeware one is Partition Logic.
You CAN re-size partitions in Vista and probably in Windows 7.
Were you aware that when you multiboot XP (or 2000 ?) and Vista, EVERY TIME you boot XP, by default, ALL the System Restore restore points are LOST in Vista ??
As far as I know the same thing applies to when you multiboot XP (or 2000 ?) and Windows 7.