Reformat Stuck At "setup" Screen / Getting Blue Screen?

I tried to reformat from the XP CD and from a boot disc floppy. Each time the process gets stuck at: Windows Setup.There is nothing else on the blue screen. It won't go past there to the agreement section...or anything else This system was a custom built computer, given to my mother-in-law about 3 years ago. The company has since gone out of business. It was built w/ XP Professional SP1 and has since been upgraded w/ SP2.Outlook express stopped working properly and would shut itself down as soon as it was opened. Then the dial-up connection would connect but no internet explorer pages would load.