^^ Yup! You can install through a usb flash drive. Or you could upgrade a previous version using an ISO inside of windows! No worries, thats NOT illegal. Use PowerISO to make the ISO copy.
Edit: Forgot you have a broken cd drive. If you have another pc then make the ISO copy on the other pc and transfer it to the other pc using a network folder or a flash drive. An ISO copy of xp should be about 700mb or so. If you dont have another pc then you could download a CLEAN and Legit copy of xp off the internet (torrent site).
P.S. Downloading a CLEAN and Legit xp ISO is not illegal if it is not tampered with. Then just use the key that came with your other disk to install.