What media are you using, is it possible that any DVD/CD is dirty or damaged, or that DVD/CD drive is faulty?
How to replace Microsoft software or hardware, order service packs, and replace product manuals
The hard drive manufacturer will have free diagnostic software that is bootable, or that may even run from within Windows, that will thoroughly check the condition of your hard drive.
Have you tried setting the Bios to any Safe Defaults?
If Setup has progressed far enough you may find information in any of these setup logs.
C:\Windows\setupact.log
C:\Windows\Logs\DPX\setupact.log
C:\Windows\Panther\setupact.log
C:\Windows\Panther\UnattendGC\setupact.log
C:\Windows\inf\setupapi.app.log
C:\Windows\inf\setupapi.dev.log
C:\Windows\inf\setupapi.offline.log
C:\Windows\setuperr.log
C:\Windows\Logs\DPX\setuperr.log
C:\Windows\Panther\setuperr.log
C:\Windows\Panther\UnattendGC\setuperr.log
You might need something like BartPE to access them (if they exist in the first place).
You might be able to make use of BartPE (a mini XP self contained on a bootable CD and run from CD).
You can get special Adapters which will connect the Laptop's hard drive to another machine.
WIndows xp on laptop stuck in startup loop
thread779-1492440: WIndows xp on laptop stuck in startup loop