are either missing a step or skipping a step in the installation as a normal Retail or OEM Installation CD allows you to eliminate partitions and create new ones very early in the process.
I would suggest that you follow this link -
The first screen shown under Part 2 is where you are not deleting the partition and another attempt will rectify the situation.
I have reinstalled xp from cd three times and have three copies to choose from at start up. I have been trying to format the hard drive, however when I enter setup from cd (I am booting from CD) It states that I can not delete partition because set up files are on the partition. Any help would be greatly appreciated.