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I had a similar problem trying to install xp sp3 on an older machine that didn't have smart drive and I finally one night re partitioned the drive re formatted it then again booted from a win 98 3.5 I think the D: cd i386 then it gave me D: i386> then put after the D: i386> winnt, and it started to install it asked for smart drive once again so I picked install with out smart drive and I got a blue screen saying loading windows file and it seemed to just be froze there. I got frustrated once again and clicked off the monitor and let the tower stay on all night, when I got up the next morning it was installing files running the long blue bar at the bottom of the screen and about 2 hours later it rebooted and I got the End User Licenses Screen hit F8 and about 30 minutes later windows was up and running.. Hope that helps.