you can certainly delete everything, but installing XP?? no, not without magic.
to delete everything just use QTparted and repartition the drive, sadly the errormessages indicate a failing hdd.
try reformating with QTparted and if that fails you can try with a new hdd,
they can cost as little as 60€ (for a 20G) I would consider it an option,
On the other hand I do not know how confortable you feel about opening a laptop to replace a faulty HDD...
not an easy task on some models (I should know I have opened hundreds)