So is the system hung up on the install now? if ntfs.sys is missing try this

ntfs.sys missing or corrupt error message
To resolve this problem do the followings:-
1] Boot computer with the Windows XP CD-ROM in the CD-ROM drive.
2] To repair a Windows XP installation using Recovery Console, press R.
3] At the command prompt, type the following commands:-

cd \windows\system32\drivers [Press the ENTER Key]

ren ntfs.sys ntfs.old [Press the ENTER Key]

If the ntfs.sys file is there and corrupt it will rename it. If it is not there then it was missing.

4]At the command prompt, type the following command, and then press ENTER:
copy X:\i386\ntfs.sys drive:\windows\system32\drivers [Where X=CD-ROM Drive]

5]Remove the Windows XP CD from CD-ROM drive, type quit, and then
press ENTER to quit the Recovery Console.

6. Restart the system.

all good advice from fresh, but i beleive that the hard drive is dying. you need to run a disk utility that can check the drive sectors. each time the drive tries to copy to that sector it cannot. and when you do a format is does not reall repair the HDD. but it's best if you use a normal format option. DO NOT USE THE QUICK FORMAT.

Hi willmay

I have ran into similar problems with a few computers and everyone of them had a bad RAM module. since you have 512MB of RAM, check to see if its one stick of 512MB or two sticks of 256MB each. If you have two sticks I would suspect a possible bad RAM module, If its just one stick then I would suspect the Hard drive next.

If you have access to diagnostic software to scan and test the hardware thats what I would do. you can download memtest to test the memory(I think its free, havent used it in a long time). Also check the manufacturer of the hard drive then go to the website and you should be able to download software to test the hard drive. since you cant boot the computer you will need the .iso files and then burn them to a cd. one cd per .iso file. and then boot the computer to the cd and follow the directions from there.

Hope this helps