I have installed MySQL 5.1 on XP without issues. So it is debugging time.
1) If you type "cmd.exe" in the Start menu Run box, does the command prompt window open?
2) If you go into the Service control panel and shut down MySQL, does the command prompt work again?
3) How much free memory do you have after installing MySQL?
4) When you run the command prompt, does cmd.exe appear in Task Manager and does it stay there? In other words, does it start but just hang and not display the window? Or does the window flash by and cmd,exe goes away (no longer in Task Manager).