It is likely your PC had XP installed in a slightly different way to a simple `disk` installation and as a result the Registry can`t find the file.
If you have two DVD/CD drives, have you tried the repair from both?
Is there a copy of the i386 file in your C: partition/drive?
These are both common problems but I`m certain there are others. If you still have problems post again and we`ll try to think of other things.