Is the laptop new or no? I suggest you download Ultimate Boot CD 4.0, burn it to a CD and boot to it on your laptop and run a HDD and memory diagnostic. Although it sounds like a HDD issue, it never hurts to verify the RAM is good. You take your XP source, copy it to a folder on the HDD, download and install nLite, browse to your folder from within nLite, choose to integrate a Service Pack and also Create Bootable ISO, browse to the folder you saved SP2 after you downloaded it, proceed. Then create the bootable ISO. Burn it, done.