Well done. I was about to say that one or more of your setup files are missing or can't be read by the IO device (Your reader).
Now you have it up and running may I suggest you burn yourself another copy of XP as next time you might not be so lucky with your install disk. You already have the licence (I presume) so effectivly you would just be making a backup copy which is perfectly legal. If your CD will not copy then I would try and download a version from a file sharing network. Make sure your Antivirus is installed, up to date and working though. You can download an ISO image that your burning software will just burn straight to disk. Remember to make it bootable and have you ever considered slipstreaming. This is where you add windows updates, patches, fixes, software etc to your windows install cd so the next time you install XP things such as service pack 2, IE 7, flash player and the hotfixes install at the same time. Saves all that extra time rebooting and hassle installing them after.
I had a recent post on here regarding slipstreaming IE7 and was pointed in the direction of a free open source program that lets you do just this. Check it out at http://hfslip.org/ Program is called HF Slip