System manufacturer and model?
I would try running the chkdsk /r command from the Recovery Console of the XP CD...then I would try to boot into XP.
If asked to activate, elect the "later" option.
If you don't have Internet capability when you assert that you want to activate now...it could just hang.
If the system successfully boots into XP, go to Device Manager and check the apparent status of all drivers for system components. If any drivers need to be installed, please do so.
You can always do telephonic activation, if the system actually fully boots into XP.
If all this fails...I would just try a repair install of XP.
How to Perform a Windows XP Repair Install - http://www.michaelstevenstech.com/XPrepairinstall.htm