What happens if you leave the system on the Hardware monitoring page of the BIOS for a long time?
What version of XP are you using?whats the cd like? the first thing i would do is try a different cd of XP at least if not of another operating system.
If you are still getting the same error, i would then make sure you have nothing connected that you do not need to install the OS with.
I would also try installing it with only one stick of RAM (that you know 100% is good) in at a time, if that bay dosen't work try the next one
I would then cross test all the components SATA cables, everything.
If after all this you stil are getting the same thing, i would then start disabling components form the BIOS: AUDIO, NEtwork adapters..etc
Does it say anything else, in terms of error codes and such apart from "IRQL NOT LESS OR EQUAL, Tech Imfo, 0x00000010, 0x00000002, 0x000000000, 0x8051AA58"??