Originally Posted by MrViggy
It sounds to me like Windows XP is not detecting the SATA chipset, and not loading the driver for it. This would explain why everything else detects the drive, but not XP (also explains why when you try to boot, it says that the SYSTEM32 folder is corrupt).
Was XP ever running on this PC, in it's current configuration? If so, perhaps the driver files got corrupt somehow. Either way, if you have access to another machine, see if you can download the drivers for this SATA chipset, and when you boot from the Windows CD, it should allow you to insert a floppy to load "extra" drivers.