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TAKE OUT THE XP CD AND PUT IN THE BLANK CD THAT WILL BECOME THE BARTPE CD
I think they thought this step was self evident.
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Is one supposed to overwrite the MS original system CD belonging to a different computer just to rescue another machine? From the licensing point of view - may be yes but I don't think so, really. Do you?
You do not overwrite the original CD. These CDs are not re-writeable anyway so you can't overwrite it.
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A: Is the assumption that the BARTPE CD is to be prepared on a working PC and not the PC that will not boot?... I assume YES is the answer and if so:
You assume correctly.
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B: When the instruction is to insert the CD with "installation files" should one insert the CD bonded (or belonging to) to the PC which works or the CD bonded to the PC that one is trying to revive?
It doesn't matter.