Ok got the answer, good news is that it is do-able, bad news is that you need a copy of Windows 98!
Firstly you need to insert the 98 disk and load the comp up from there. Then once you get to the first formatting option, (not sure if it's during loading 98 or after) you formatt your hard drive, (I assume you have everything you want off it ).
Once you have reformatted you should then be able to load up and use your XP disk
He had the same problem when XP came out, Microsoft have made it so that there latest OS isn't backward downgradable...but only as far as XP and 2000....it shouldn't give 98 any probs .
He spent a whole bloody night working this out.
....now just give me your email address so that I can forward you my bill...
Good Luck