There shouldn't be a CD 2 if you're using a regular Windows XP. There could be one if you have a set of restore disks.
The correct way to search for missing or corrupt files is to use the System File Checker.
Go to the Start button, then click "run" and in the resulting dialog box type:
. . . and hit enter. Notice the space between the c and the /.
It will scan your computer and ask for the XP disk if necessary, but it will also be able to pull some files from the i386 folder. It may work. Reboot your computer after running SFC.
Otherwise, you may have to repair IE. Now, I'm not sure that the same thing works for Internet Explorer 7 that works for Internet Explorer 6, and you didn't mention which version you have. If you have Automatic Updates turned on, you may have 7. If your icon for Internet Explorer has a fancy gold band around a blue globe, it's the new version.
This works for 6:
1) From the Start menu, select Search, select All Files and Folders.
2) Select More Advanced Options and place a checkmark beside Search Hidden Files and Folders option.
3) Ensure that Search System Folders and Search Subfolders are also checked.
4) In the All or Part of the File Name box, type ie.inf
5) In the Look In drop-down menu, select C: or the letter of the hard drive that contains the Windows folder.
6) Click the Search button.
7) In the search results pane, find the ie.inf file located in Windows\Inf folder.
8) Right click the ie.inf file and click Install on the context menu.
9) Reboot the computer when the file copy process is complete.
Or, you can try uninstalling IE from Add/Remove Programs and then install it again.
There's some interesting info at this page.