when your hardware is not "certified" to work with XP. I've seen Network PCI cards, CD-ROM drives, and other things come up with this error.

The old RRR fixes it most of the time. Sometimes you have to disable CPU and motherboard caching and then reinstall. I think the cach may be killing the drivers and it is reading it as bad from the CD-ROM. Some CD-ROMs have error correction or buffering, others don't. Another thing to do is remove any cards that are not needed to boot Windows. Like the audio, modem, network, etc. Then do an XP install, and later put those things in one at a time and install the drivers for them. Sometimes when any version of Windows tries to install a lot of drivers, it conflicts somehow. But one at a time seems to do better.

Seconded on the CD-ROM switching, my father had a problem with his CD-ROM a while ago, and my brother switched him to a new one. This was under Windows 98. I almost always try to get a name-brand CD-ROM drive that I know works or at least has a warranty or return policy in case it doesn;t.