I'm taking a wild guess here as my knowledge is limited, but looking at your specs something stands out;
C drive with XP installed, 18.6GB of which only 169MB is free.
That's a vanishingly small amount of free space, and I wonder if the Windows 7 install is baulking because of that.
This is what Microsoft says about this error in an XP system;
You will see that the problem occurs if "too many files are copied to the root folder of a boot volume that uses the NTFS file system". The "root folder" is drive C itself.
I wouldn't attempt Microsoft's suggestions of resolving this, but I wonder if you need to boot up into XP and start freeing up a few GB's of space. I am guessing that the Windows 7 setup disk needs access to the XP drive to store temporary files, and also to install it's own boot-loader file, which then allows the system to be dual boot.
Thanks for taking the time to read this first of all... I've just recieved Windows 7 Ultimate but when I try and boot it from the CD it comes up with the error message
'NTLDR is missing
press ctrl alt del to restart'
The confusing part of this is that I've not yet installed the OS, this is after I select which drive to boot from, but before the Install page comes up.
I've also tried installing from my current Windows XP OS, but when I do so it comes up with the error code 0x80070490 ~ which means it can't 'Find a location to store temporary installation files.'
A few things about my computer:
Dell Optiplex GX270
XP Harddrive: 18.6 GB, 169 MB free
Harddrive for 7 Install: SATA Drive, 146 GB free
2.25 GB of RAM
2.8 GHz Processor (Intel Pentium 4 CPU 2.80 GHz)
Graphics Card: nVidea 6200
~ HT-DT-ST CD-RW GCE-8483B .... for some reason can't reconise the Windows 7 CD .... came with Optiplex
~ SAMSUNG DVD-ROM SD-612 .... trying to boot Windows 7 from .... Added later
ps. It's not a matter of me burning a bad .iso file as I bought the DVDs whole from Microsoft, so I neither downloaded or burnt them.