It sounds like you have gotten things pretty badly embedded in your OS ... plus you are running SP1. Probably not worth expending a lot more time on this.
You say you have another copy of the XP CD ... so the machine you are having the problems with should have an XP CoA (certificate of authenticity) with a valid product key - look for a sticker like this:
If it does install from scratch (using the other machine's CD) but use the product key on the machine in question. Now, if the CD is XP SP2 this might cause a problem .. I don't know if there is an authentication issue with an SP1 key and a SP2 CD. There are also places selling CoA labels ... supposedly pulled off of old machines ... but you might just want to bite the bullet and go legit.
Going price for XP/SP2 on eBay is around $85. Or maybe Mouse can help you out.

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