I suppose it always fails at the same place as well, right? Have you tried killing as many background processes as possible? There's quite a lot going on in the background with WinXP.You might try installing it on a friend's Win98 or Me system just to make sure the disc really is good. Do a search on this board using the Find function on the menu bar to look for other threads from folks with similar problems. Search for 'XP' and 'install'. You might get lucky.
Don't give up! We have friends in Denmark!