I, too, had an old WinXP Upgrade CD. This is the original version of XP upgrade (not SP1 or SP2).
I wasn't able to get the install process going at all using the actual CD. I had to make a disk image out of it.
When, during installation, the installer asked for a previous version of Windows, I went and found my Windows ME Upgrade disc, made an image of it, unmounted the XP image and mounted the ME image, hit enter, and the installation continued.
When XP asked for the XP CD to be reinserted I just unmounted the ME image and remounted the XP image and the installation continued.
Aside from having to make the images of the CDs, the entire installation took about 20 minutes. That's the fastest installation I've ever encounterd with XP.
Now that XP is installed and running, the boot time is about 15 seconds, which is just amazing!