That rules out physical damage then. Still if you have another drive you can try inserting the disc in it.

My guess is that something is interfering with the proper installation on your own computer. You might have something wrong with your Windows XP. I don't say that you need to reinstall it but it is still strange. Can you tell me what programs/applications do you have running on your computer? Such as those that start-up automatically and either run in the background or stay in your system tray. You can also press ctrl-alt-del to access the task manager and see the running processes. You should also try temporarily disabling antivirus/anti-spyware programs and try installing again.