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I format it, and now it boots and gives me a blinking cursor even when i put the XP CD drive back in. It ignores it. Thought it was the laptop booting to the CD drive until the next situation occurred
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Here is my theory... Vista will edit your MBR (master boot record) which is different from the Volume Boot Record (bootloader), and even if you reformat this will not fix the problem.
The way Vista manipulates your master boot record is different than XP. It is looking for the Vista bootloader. Are you sure there is no MBR partition?
The only thing I can't explain is why you can't boot from CD. Go into your BIOS settings and set the CD drive as the first bootable device. When you put in the XP CD, choose recovery console, try running the commands fixboot and fixmbr
Try this on both machines. It is possible the first Vista machine locked you out if you used the SAME key for activation. MSDN should give you 10 keys, no?