Before wiping a drive full of data you can also try a few other methods. To save the current installation at least for XP Pro and Home versions alike you can use an old 98 startup floppy(or burn a cd with those files to boot from) to enter the "fdisk /mbr" command once you reach the dos prompt. This basically repairs/rewrites a new master boot record. You could see if that would work on that version. So far I haven't found a direct reference however.
Deletion of the current installation with the installer should give you the option to install on the same partition rather then deleting it. But if you want a fully clean install already having files stored on a second drive you would need to have the installer delete the present on then create and format the new one for the fresh install there. To reformat the second drive you would do that at another time there by the disk manager if available in that edition or a number of other ways.
"Perform a Repair Installation
Published: August 1, 2002
Submitted by Doug Knox, Windows XP MVP, Tewksbury, Massachusetts
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How do you perform a reinstallation of Windows XP, sometimes called a repair installation?
Configure your computer to start from the CD-ROM drive. For more information about how to do this, refer to your computer's documentation or contact your computer manufacturer. Then insert your Windows XP Setup CD, and restart your computer.
1.
When the Press any key to boot from CD message is displayed on your screen, press a key to start your computer from the Windows XP CD.
2.
Press ENTER when you see the message To setup Windows XP now, and then press ENTER displayed on the Welcome to Setup screen.
3.
Do not choose the option to press R to use the Recovery Console.
4.
In the Windows XP Licensing Agreement, press F8 to agree to the license agreement.
5.
Make sure that your current installation of Windows XP is selected in the box, and then press R to repair Windows XP.
6.
Follow the instructions on the screen to complete Setup."
Applies to XP Home - Pro - Media edition
http://www.microsoft.com/windowsxp/using/helpandsupport/learnmore/tips/doug92.mspx