I am trying to reinstall my xphome upgrade
Why? It's very rarely the right thing to do.
but the computer is saying that
the disk is older than the current installation. I'm assuming it's because of
the service packs.
Yes. But when you reinstall properly, it doesn't matter, since
reinstalling reformats the drive, thereby deleting everything on it.
To reinstall you boot from the XP CD and follow the prompts. You're
doing it wrong, which is why you are getting the message.
I would like to reinstall without losing my files or settings, is this
possible?
No. Reinstalling means removing everything on your drive. If you want
to reinstall, you need to first backup everything on your drive (if
you're not already doing this regularly, you are living very
dangerously), reinstall, then restore your backup.
There's something called a "repair installation" which will leave your
files intact, but that's a misnomer in my view. It's not a real
reinstallation but just a repair of the existing operating system. It
successfully fixes some problems, but unlike a real reinstallation,
leaves many other problems unchanged.