System password as in Windows one or BIOS? If BIOS you need to crack open the case, find the battery for the BIOS and yank it out for a minute of so. Take out the battery and the power supply power as well.
For Windows, you can install a new version of XP over the old one with no issues, but it will remove your currently installed programs, and you may end up losing your files if you format the drive. Re-installing Windows will however get rid of the current password. Just put in the Windows CD/DVD and boot to it, run the setup, and you get a fresh Windows setup. You will need to make sure you have the drivers for your system as well or you will find many things not working.