Ok, this one has a few people stumped, we do not know what is really wrong...
first off we have a hp pavillion (dont know the version, probably doesnt matter) and when refreshing the OS it says that it cannot find the hard drive (has anyone experianced this). the BIOS still shows, and recognizes the hard drive. other computers still recognise the hard drive and can read it. when a newer version of windows XP is placed in the computer to be installed, it takes the disk and begins the install. however, at sometime into the installation it stops and asks for a service pack 2 disk... something that i've never heard of it doing.
To get Windows XP installed there are two HDD requirements that need attention - size and SATA mode.
To be able to use any HDD over 137 GB (by disk maker's measures, or 128 GB by Microsoft's counting system) you need a feature called "48-bit LBA Support" in three places: the HDD unit itself, the hard drive controller (usually in the mobo and controlled by BIOS code), and the Operating system. Any disk over that limit will obviously have this feature built in. ANY SATA controller system will have it. Almost all IDE controller systems on machines built after about 2000 will have it. On those that don't or are older, if you are using the mobo's built-in HDD controllers and ports, you often can ensure the feature is there by updating the mobo BIOS to the latest version from the manufacturer. For the OS, the very first version of Win XP did NOT have this feature included; it was added in Service Pack 1 and maintained in all versions of Windows since then. SO if you are trying to install from a Win XP Install disk that has NO Service Packs included, you should not; you should get a more recent Install disk.
ALL versions of Windows XP do not know how to deal with SATA or AHCI disk units unless you install a driver for those devices. (Vista and Win 7 have these drivers included so it is not an issue with them.)If you want to install Win XP and boot from a SATA disk (this does not apply to installations to an IDE HDD) there is a necessary procedure (uses a long-standing ability in Windows) early in the Install process. It will pause and ask if you have drivers you need to install and, if you do, you must press the "F6" key to get into that routine. Within it you can install drivers to become part of this OS, but you can ONLY install them from a floppy disk that needs to have been prepared ahead of time. For people who can't do that, many mobo makers have added a feature in the BIOS Setup to get around this need. In BIOS Setup if you go to where the SATA ports are Enabled there is a place where you set the port mode. Your choices often look like IDE (or PATA) Emulation, native SATA, AHCI, or RAID. If you choose IDE Emulation, the BIOS will intervene and make your real SATA drive appear to Windows to be just another IDE drive that it understands fully and will use with no need to add special drivers. (In making this choice you lose a couple of advanced features of AHCI, but many think that is acceptable.) So unless you have and plan to install the correct device drivers early in the Windows XP Install process, make sure your SATA drive ports modes are set to IDE (or PATA) Emulation. This is NOT an issue if your boot drive you are installing to is an IDE device already.
IF you are installing to an IDE drive, make sure the jumpers on it and any other IDE devices are set correctly for Master and Salve roles, and that the correct ribbon cable connector is plugged into the right device. There are NO settings of Master or Slave for SATA devices.
You report an odd message when trying to "install a newer version of XP". Just to be clear: are you trying to do a complete fresh Install of Win XP to an empty drive, or are you trying to do a Repair Install procedure to fix an existing XP installation on a drive? If you are trying to do a Repair Install of a previous Win XP with SP2, but are doing the work with an Install disk that has SP3 built in, I could understand getting such a message. I really doubt you could do a Repair Install that way. I expect you would have to use a genuine Win XP Install disk that includes SP2 to do the Repair Install. After that is complete, you could consider upgrading the OS to SP3.