Paul, sorry for delay, it was my window for exercising.
1) Do you have hidden and system files visible? It is important you copy everything from the DVD
2) Please try to raise a command prompt in safe mode. If you hold F8 while booting, it should bring the "Windows Advanced Options Menu" , then click on "Safe Mode with Command prompt".
3) You will get a DOS like window, go to your partition (it will probably be D: ) and type setup. Then it should start XP setup. Please make sure you select the correct partition to install it, otherwise you might end up erasing your Win7
By the way, if I understood you right this is a new laptop but you have never installed XP, Win 7 was your first OS, is that right? Is that the original XP DVD that came with the laptop?