Compaq (and some others) frequently use a proprietary version of installation, reflected on the disk they give you with the computer; thus if you have to reload from the original disk, it reloads the way the factory wants it to. These versions aren't always like the retail or regular MS OEM versions. I remember that Compaq always had their recovery/install disk create a secondary partition for temporary and recovery files. Best bet is to borrow a CD from a friend (NOT Compaq, HP, Gateway) and try using their XP Home disk as the underlying license for your upgrade. Their disk SHOULD allow you to remove existing partitions.

Any questions, e-mail me and I'll try to help.
Bill