It sounds like you are trying to load xp from within windows 7. You can't do this.
You need to put your cd in.
Restart your computer and tap the boot menu key ( some machines are F12 some are F9, it varies. ) and select boot from cd. Or you can go in the BIOS and change the boot order.
Once it boots, from the cd , you will need to "press any key' to continue.
Then you just follow the instructions.
Hope this helps. If I missed something or you are unsure about something please don't hesitate to post back