No sudden revelations I'm afraid, but a few things I'd always recommend with these sorts of issues especially on older PCs:
- Firstly, sounds simple but the computer does meet XPs requirements right?
- Secondly, just to confirm you are doing a full format and not a quick one? A quick one won't perform any deep checks on the disk and as such the installation may try and write to bad sectors, possibly causing symptoms similar to what you describe.
- Run memtest, bad RAM can cause all sorts of strange issues and lockups, especially if XP needs to use all of it (i.e. there's not much)
- Check the SMART status of the hard drive, just in case.
- Grab UBCD, it's an amazing tool: http://www.ultimatebootcd.com/
you may want to play around there to see if there's any tools that report problems, but I'd especially recommend running badblocks.
- Can you put another OS on there or do all of them cause issues? Might throw some more light on the issue if you try and install say linux and get an error.
If none of those help, say what you've tried and I'll try and think a bit more