since you use xp home i assume you have a legal copy or a format and recovery cd with it on it. i have seen the same thing you describe when using 98 boot disk and some older utility disk. if you have a retail copy of home, drop it in the drive and boot from cd, follow through the instructions to do a install. when you get to the point the partition ifo is displayed, highlight and delete the ones you have. now you should be back to unformatted space, highlight, press c to create, select the size you want (if not all) now if you made a (lets say)20gig and you still have unpartitioned space, highlight the unpartitioned space and create the rest the same way you did for the first one. highlight the one you want windows on and now hit enter, it will offer format options,ntfs, or fat32....you choose.(i like ntfs). you should be able to go through the rest of the install now. if you have a format and recovery disk with xp, go to
http://www.bootdisk.com/
download the xp bootdisk set, follow the steps above after they boot the computer. then use the restore disk to install.