Thanks a lot for the info Glenn. It is indeed a Laminar Research set of DVDs (very posh in it's metal box).
I've managed to get XP to start now by disabling my antivirus (F-Secure) so now all I have to do is find out exactly what it's doing to prevent the net connection. I've tried excluding the XP folder from the AV and also turning off its firewall. Both to no avail, so I guess there's more to try. Also every time I start XP, when the AV is disabled it asks me for Disk1 which I guess authorises the install. At least I've seen it working now on this machine so I have a lot more confidence of solving this. It was either fight this one or install XP on my MacBook Pro, which I'm sure is under resourced compared to the PC laptop.