OK, what you have done...has been done before and there is a solution
XP FAQ, Two XP Installs On Same Partition - http://www.michaelstevenstech.com/xpfaq.html#20
Click on question #20, if the answers are not readily apparent.
I've done this (two installs, 1 partition) and I did not go about my correction in the above manner, but there are many roads to the same point in computing:).
When your system boots, you should be presented with 2 options to boot into. When you boot into the newly installed O/S (with no programs installed), there literally is nothing you can do. All of your programs are installed on the other XP option.
Of course, you could elect to install programs in the new O/S, but it's probably quicker to repair the other, original install. On the other hand, if your problems on the original would not be cured by a repair install, it probably would be best to make the new your only and delete the old, after moving your favorites, email, and other items which might not just be data files.
What I did was to boot into the install I wanted to keep...deleted the Windows folder of the other install...and then just ran a repair install on my XP O/S, which automatically fixed the boot situation (and, in your case, will give you the effect you were striving for).
In any case, your attempt at a repair did not turn out correctly and you still need to do that.
How to perform a repair installation of Windows XP if Internet Explorer 7 is installed - http://support.microsoft.com/?kbid=917964
Post back if you have questions, etc.