Is the hd formated in FAT32 or NTFS?
I have never used madboot, but it seems to have a memory management problem. You need to load hymem.sys and/or smartdrv.exe to load DOS or madboot into the upper memory blocks or extended memory, which allows winnt.exe to run.
If your hd is formated in FAT32, this is easy.
You may be able to make a new 1 GB - FAT32 partition using
Bootit NG, and then somehow move or copy the XP files to the new partition (D:\).
Format C: to FAT32 using Bootit (optional?) It helps when booting dos to see both partitions. This may be a can of worms because you want to install XP to the C: drive. A DOS boot won't see a C: drive formated in NTFS. Will the XP install call the first partition C: or D:? Only a test install will tell.
Boot with a DOS disk that has hymen.sys and smartdrv.exe properly configured
Go to D:
Go to i386 folder
Run winnt.exe
I have never installed XP this way, but if you get the same format option as a standard XP install (from a cdrom) - format C: to NTFS before installing.