I'm not sure what exactly might be the problem.. Check whether the installation medium is alright.
You can also install Windows 7 from existing OS.. at least, it allowed me to install from my Vista OS. I just run the Win 7 disc in Vista, and it asked me whether you want to upgrade or do a fresh installation. I chose the 2nd one, and then it gave me the list of partitions, and after doing all the formalities, it started the installation by copying the necessary files. Then asked for a reboot, and upon reboot it directly went into the Win 7 setup menu. It was a routine installation after that..
You can try the same from XP.. it might work..!
P.S: Always backup all essential data before doing a fresh install or a reinstall..