Be sure that you have the product code before you wipe the drive. You can find out what the product code is on that computer by downloading
SIW and look at Licenses under the Software menu. You will also want to make sure that the XP CD that you have is the same version the one the code is for.
If you are installing the OS on a hdd larger than 32GB you will have to use NTFS. There are advantages to NTSF that warrant its use anyway, you don't have individual file security with FAT32 files, and you are limited to a single file size of 4GB, that's about the size of a movie.