Run a full diagnostics check on C. From WinXP, right-click the drive > Properties > Tools > Check Now > Put a tick in both boxes before clicking on Start.
Once it completes, try formatting it again. If you're unable to, then the C drive may contain XP boot files (usually boot.ini, ntdlr & ntdetect) from your installation on D - this happens sometimes. There's a way round this, but I'll tell you what to do only if it fails again.
I'm also aware you have a related thread running at click here. I'd recommend closing one (resolved green tick) & keeping one open. G