You've gone about it the wrong way...
You only need to boot with the XP CD and during the setup choose a clean install.
Then further down the steps look for the option to delete your existing partition/s and then create a new one and now it will let you format and install XP.
See this link for guidance:
Partition XP
here's my problem: i wanted to reformat my hard drive and reinstall xp.i used my installation disk and chose to do a clean install not an upgrade. however like most things from microsoft, that did not work.i still had most of my old files and program files(though none of the programs were installed. they were missing the executables) i'm running xp pro on an ntfs based system but am unable to reformat my hard drive.after failing miserably with microsoft's way,i chose the following method: when i bootup windows, i go to the safe mode with command prompt option. then logon as administrator, and install a windows 95 boot disk and type format C:
after confirming that i want to format, i receive this message:FORMAT CANNOT RUN BECAUSE THE VOLUME IS IN USE. then windows will ask if you want to dismount the drive so that you can format it. i choose yes then windows says the drive is still locked by another process. i have tried this with and without administrator priveledges but nothing seems to work. i have opened up the task manager while doing this and systematically closed ALL SERVICES that are not necessary to run but no luck. i personally believe that because i have a ntfs based system, is where the problem lies. ANY SUGGESTIONS???

Chowhound
Comic Vine
GameFAQs
GameSpot
Giant Bomb
TechRepublic