This is how I would do it:
Change the boot order to CD being first in line, then install windows xp to the new drive.
Once it's all installed and working, I would then download this:
http://gag.sourceforge.net
The above links to a graphical boot manager that runs on startup, which allows you to select drives/partitions to boot up. When you download it, you need to:
Extract the files to a folder on your PC => Insert a formatted floppy disk => Double click on "install_XP.cmd". It should then transfer the necessary files to the disk.
Now go back to your BIOS and change the boot order to have your floppy drive first in line. Insert the floppy disk and let it load up. You should then come to a screen with 5 or 6 options on it. Select the "Install to disk" or something like that. Then you need to add your drives to the program. You should be able to figure out how to do that yourself (don't know from the top of my head).
Anyway, that's how I would do it, becuase there is a nice, user-friendly boot manager which pops up making it quite easy to use.