It's funny that you say this because I'm actually using a Windows 7 disk right now to get a command line. I found a way to get it to allow a simple format C: command by unmounting programs that are currently using it. I hope by totally leveling the drive that it will erase the bootloader completely. If it doesn't, I'll try what you just typed.
Edit: Btw, just in case you didn't know, netbooks can only use a 32 bit OS and my disk is 64 bit, so I won't be installing Win 7. If this format works, my Win Xp should load!
your problem might be as simple as xp simply doesn't have a driver for the HDD controller...or you have a corrupt xp disk...i myself would actual delete the partition, and leave it as raw, and see if that works...
you don't need to rebuild the mbr, since there is no OS on it, so the options the other people are giving to fix it with windows 7 disk, wont work, since there is nothing to rebuild it for...this is definitely a problem with the windows media being used, are you using usb install media? or a usb cd/dvd rom? cause i don't think many netbooks come with them...