Its so bizarre that having the hard drive in causes it to be unable to boot from a CD. If I force the BIOS to CD first, and even do the one-time boot for CD, it comes up with the "Press any key to boot from CD" and then "Inspecting your hardware configuration" like its about to launch the XP installer. Instead, it just stalls out.
I've tried pluggin in an external USB drive, unplugging the main drive, booting into the "Repair Console" on the XP cd, and then re-inserting the old drive. It doesn't detect it at all. I tried using Damn-Small-Linux and Knoppix - they both mount the drive but it appears blank. One time it actually showed the correct sizes (30 GB, 23 GB used..) but still appeared blank. I tried booting from a win98 boot CD, re-inserting the drive, and trying to browse to it. No luck.
Now I'm trying something called Universal Boot CD, which claims to have all sorts of HD diagnostic tools.
If all else fails I'll try to look for a SATA enclosure - I'm not sure how that would help, though... if the drive truly IS screwed.