"One of my machines is a Compaq Pentium 4 running Windows XP Pro"
Do you have another PC running XP? If so, try copying the Atl.dll file from that into the System32 folder in the PC with the problem.
"You have a newer version of the operating system on your computer and you cannot install an older version"
That is almost certainly because you now have Service Packs installed that weren't in the original CD. You would still be able to perform a "clean install" by booting from the CD (assuming this is a genuine Microsoft CD and not a manufacturer's "recovery" disk). Clean installing would, of course, destroy all of your existing data on the drive, so a backup of important files is essential.