Although Windows XP can work with OS partition placed on D: E: or any other drive, it's normally recommender to place it on the usual C: drive. You shouldn't change system partition letter after Windows installation therefore you need to ensure that system partition has correct letter during the installation.
If you have multiple partitions on your hard drive in some cases Windows XP setup may mark your intended OS partition as D: and some other (e.g. Recovery) partition as C: (This often happened to me wile downgrading DELL Latitude laptops from Windows Vista or 7 to Windows XP). This is not a problem if you want to delete all partition and install Windows on a blank hard drive. However if you want to keep your Recovery partition, there is no way to fix this inside Windows XP setup.
Normally Windows XP setup sets C: letter for a partition which is flagged as active or boot. So if your Recovery partition has been assigned letter C: it's probably marked as a boot partition (this doesn't mean that Windows will necessary try to boot from it). You can fix it using one of many bootable partition managers.
Free opensource gparted will do the job just fine:
Boot from gparted live CD.
Right click on your Recovery partition > Manage Flags > unselect “boot”
Right click on your OS partition > Manage Flags > select “boot”
After this Windows XP setup should set your OS partition as C:
Be aware that if you already have some OS installed gparted may make it unbootable. This can be fixed, however because you are planning to reinstalled OS anyway, it shouldn't be a problem.
Windows XP installation
