Just for some who face problems.
The Win XP CD is a bootable one. This is also given with the upgrade version!
If you face the problem that "no valid OS found" or, as it happens at a friends machine, your original Win 98 is a HP version (maybe any other operator) than this Win CD is NOT ACCEPTABLE as XP cannot find the Windows directory when asked to provide the original upgradeable version...
You nee a clean Windows 95/98/ME or whatsoever and than it does it.
While we are at it, make sure that you have backed up everything before upgrading. There is a good chance that it does some kind of "clean" install, it whipes all off the disk and you have a NTFS file system, no FAT anymore...makes it a bit more interesting to find one of the sometimes so useful unformat or undelete programs.