Usually, a Hal.dll error as you described in your original post is simply an
indication the file is corrupt or missing. A repair install forces the
system to go through the hardware recognition process and recreate the
Hal.dll without the need to wipe the system and start over.
However, the issue you are having, indicates the reason you received the
error was the setup itself is corrupted and apparently from what you are
reporting is too damaged to be repaired. This means a reformat that you
should realize is going to wipe the drive and starting over with a fresh
install.
If you have a retail version of WinME as opposed to a customized OEM CD that
might not be recognized by XP setup, you can actually do a clean install of
XP and only insert the WinME disk when requested for proof of a previous
operating system.
Do understand, this procedure will cost you all information on that drive
but, right now, that is a moot point as the setup cannot be repaired though
there is the alternative of creating a separate partition, installing XP to
that partition and then trying to copy your data from the old setup to the
new one; this would require third party software such as Partition Magic,
www.powerquest.com, now owned by Symantec for the purpose of resizing the
original drive to create enough free space to use for a new partition
assuming you don't already have an extra partition already created that
could accommodate the installation of an operating system.
All other procedures, formatting, deleting and recreating partitions can be
done during XP setup as follows:
Assuming your system is set to boot from the CD-ROM drive, boot with the XP
CD in the drive. If it isn't or you are not sure, you need to enter the
system's BIOS. When you boot the system, the first screen usually has
instructions that if you wish to enter setup press a specific key, when you
see that, do so. Then you will have to navigate to the boot sequence, if
the CD-ROM drive is not first line, set it first in the boot sequence. Save
your settings and exit with the XP CD in the drive. The system will reboot.
A few screens into the boot process, if you see the message on the boot
screen to "Press any key in order to boot from the CD," do so.
After loading drivers and files, you should be taken to a screen with
the following:
To Setup Windows XP now, press ENTER.
To Repair a Windows XP Installation using Recovery Console press R.
To Quit setup without installing Windows XP, press F3.
In your case, press ENTER.
Agree to the License agreement by pressing F8.
You will then be taken to a screen with two options.
To repair the selected Windows XP installation press R.
To continue installing a fresh copy of Windows XP without repairing,
press ESC.
This will bring you to a partition map where you
can delete, create and format partitions.
Select the drive you wish to format, delete the partition, then create a new
partition, format as desired and continue with XP installation.