You need to install SP1 or SP2 for windows xp. This will clear up the 127/137 gig problem. Once the service pack is installed you can partition and format the rest of the drive as you wish.
Have you installed the chipset drives for the motherboard yet? This may also clear up the dvd problem. If not unplugged the cables to the dvd drive and reseat them.
Are the audio drives for the on-board audio or for an add on soundcard?