Dell Insp. 5000e 98 to xp TROUBLE

Hello,
Laptop is a 2000 Dell Inspiron 5000e (service tag #HC3P501) with Win. ME previously installed. I increased memory to 512MB, and replaced the 5GB HDD with a 160GB HDD. The laptop does not recognize the new HDD, but the BIOS does see the new HDD and the increased memory. When I boot from CD it will go as far as the windows setup/blue screen and does nothing more. Will not allow me to partition or continue setup.
I installed Win. XP on the new disk drive from a different laptop, but the dell laptop does not recognize the O/S as being installed. I boot from HD, it say's; a disk read error occurred, press ctrl+ alt + del to restart. it will repeat the message.
When I reinstall the original 5GB HDD and boot from HDD I get a message indicating a missing or corrupted file/s such as c:\windows\ifshlp.sys and c:\windows\system\vmm32.vxd .
I only started having problems with the changeover to the new system when originally i tried to install XP on the original 5GB HDD and the original single digit memory card. When shortly after installation started, it froze and would not continue forward with the install , and would not allow me to back out.
If you need any more info please ask or use the tag # provided.
Thank you for any solutions, this pc means alot to me to have running...

- Jim (not really angry, just frustrated with this project)