Regarding the acer aspire one (AOA110)

Hi,
I have an acer aspire one, model number AOA110, and i'm in a bit] of a fix.
the hdd is 8 Gb] and is formatted into the FAT32] file system], which would be ok if the actual OS was still on it. so here's the deal. it came with windows xp home edition (sp3) , and due to some severe blunder of a client of mine, it now has no os on it. I have two recovery discs, an AA system cd (containing system images and factory backups of the computer, and another that contains the acer e Recovery program and a copy of the actual winxp home OS installation files only accessible from within the Acer E recovery menu. now, i can get the latter of the two to boot from usb, (the other contains no boot sectors so is for backup] purposes only it seems) but for some reason it will not preform the factory reset (and reinstallation of the afformentioned os) unless the hdd in question is formatted into NTFS]. now the problem. i can't format it into ntfs using dos, and every time i try a win xp disk that's made for regular computers i get a stop error, (which makes sense i suppose), what i would like to know is how could i fix this?

Thanks