Be a good boy and trot right out and buy a proper retail package of Windows XP Pro. The version packaged "free" with a PC can't be expected to be a full equivalent
I am a poor man. I can't afford "real" things at this stage in my life. Fucking H-1B's took my job and send all my wages to India where their family lives high off the hog in a house that cost USD 8,000 and healthcare that costs $40 per month.
Anyhow, I figured it out. When it says "insert into drive D", it literally means drive D. The "recovery" disk will work only if you put it into drive D, not any other letter. I have 2 CD drives. Although there is a "browse" button to select a different drive, it ignores anything from other drives and just displays the same error message over and over again after drive selection. I suspect this is some kind of anti-piracy measure to keep people from downloading disk images to their hard-drive. Either that, some idiot newbie programmer hard-wired the drive letter into the program.
I have been using drive E as my CD-Rom drive. But drive D can also read CD's it turns out. It is labeled "DVD" so I had been using E instead for all my CD reading. (Why the vendor did not install a single all-in-one CD/DVD drive I don't know. Perhaps it was cheaper to have one for mostly DVD's, and one for CD read/write.)
I recommend Microsoft add to the message, "Any other drive letter cannot be used for this operation due to anti-piracy practices". Also, remove the "browse" button for drive selection. If it is useless to select other drives, then why have a button for it?