Hello scooterpop,
Welcome to PCHF,
As long as your using the full Windows XP CD and not the upgrade version, you'll be able to boot to it.
This will create a single bootable CD on one disk with CD-ROM support.
Windows Utility Boot Disk with CD-ROM Support
Formatting a floppy disk rarely fixes any problems with them. If there is any damage to the disk, it is there for good. You may want to try new floppies.
What is the exact message you get when you try to format C:, does it say the disk is locked? If so, use the command
unlock c:
Also the format command you should use is
format c: /s will make the HDD bootable.