Uninstallable Laptop- Pro Won't Install?

My bud purchased a laptop at one of those "liquidation sales'" a week ago and its a nice laptop, person who sold it was legit and it booted up and all was fine. It currently has w2k pro on it and I am going to put XP Pro on it. Here is the problems. BTW this is an IBM Thinkpad.The machine only has a cd-rom bay and I tried to install xp pro via the cd-rom drive and no dice. Upon the boot I hit F12 to choose boot sequence and I choose cd-rom and it just goes to the w2k start up screen. My XP cd is a retail version. So I then decided I would have to access the bios to make it boot by default to the cd-rom, well the bios are password protected. So no dice there also.So I actually went to do the install via w2k, I can log on as the user name and the pass he was given for a "guest account" I load w2k and everything is fine, when I pop in the xp cd and choose install, it says I have to be an administrator to run this program. So I checked the accounts and I was able to screw around with a member of the admin group, I will use the name "John" as the account. "John" is a member of the admin group and has full control of the computer. I changed the password for "John" and was able to log on as him. However same thing, have to be an admin to run the install.So I changed the password of the administrator and tried logging back on as admin and got "local policy does not allow you to log on interactively". I checked the local policy settings and local log on is enabled. So back to square one. So my questions are, (1) if I can log onto the machine as a member of the administrator group, why I can't perform the install?(2) Why can't I log on locally if I set the admin password to my desired choice?(3) Is there a way to run the install via w2k?