Try this discussion from WinDrivers forums and see if any of the suggestions there give you a clue to what's happening.
My inital gut feeling is that your hard drive is incorrectly installed. Are you sure that the drive is correctly jumpered, enabled in BIOS, and the boot order correctly set?
Also, you cannot use a Windows XP hard drive from a different PC without formatting it and installing XP again. The copyright protection makes it fail to boot up, as you've found out!
Catweazle
Grandad
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