This is a bit long-winded but I had the same problem and managed to solve it. How you obtain the "tools" is up to you
You need:
(1) a copy of windows 98 or ME (either one needs to be upgradeable if you wish to install XP)
(2) Copy of windows XP
(3) a spare Desktop hard-drive. It needn't be big. Any size will do. And a working desktop pc to work with
(4) Windows 98 boot disk
(5) Hard drive caddy for laptop hard drive
(6) Hard drive ghosting software (I recommend Norton Ghost but there are plenty free ghosting software available).
(7) Partition Wizard (http://www.partitionwizard.com/)
(8) A USB memory stick (optional)
Firstly, install the hard drive ghosting software and Partition Wizard software on a working PC
Next, we are going to make a bootable DOS drive
Place the spare desktop hard drive into a working PC as the master drive, boot with the windows 98 boot disk and then format using the command 'format c: /s'.
If the drive is NTFS, then you will need to go into 'fdisk' to make it into FAT32 otherwise it will not format. After it has formatted, switch off your pc and then on. You should see the following DOS bootscreen:
Microsoft (R) Windows 98
(C) Copyright Microsoft Corp 1981-1998
c:\>_
Now that this drive is formatted, install this drive as a slave drive on the working PC and switch on
Plug in your laptop hard drive via the USB caddy
With the partition wizard software , create an extra partition on your laptop hard drive. The size should be enough to contain the contents of Windows 98 or ME OS disk. Create a folder in this second partition (we'll call in 'WIN' for future reference). Copy the contents of the 98 or ME OS disk into the WIN folder.
Using the ghosting software, copy the spare drive to the first partition on your laptop drive. If the ghosting software of your choice has the option to save the image, then I recommend you save the image of the spare hard drive - just in case (so you don't have the hassle of putting in & taking out hard drives in future)
Your laptop hard drive should now contain two partitions. One should be a bootable DOS partition, the other should contain ME or 98 OS disk contents.
Remove Laptop drive from desktop PC and place into your laptop.
Boot up laptop - it should come up with the DOS bootscreen
Type 'd:' without quotation marks and hit return.
Type 'cd win' without quotation marks and hit return
Type 'setup' without quotation marks and hit return
You should now be on your way to installing windows 98/ME onto your laptop
Goes without saying that if you require XP onto your laptop, place contents of XP OS disc onto a USB key and upgrade once you have completed installing 98/ME
Note: Because of the time this consumes, It might be worth using windows 95 as opposed to 98 or ME as thats relatively quick to install but I have never tried this method with windows 95 (and using a USB stick to upgrade may be a problem)
Another note: You cannot install XP direct from a windows 98 startup disk hence the reason of using ME/98 initially.
It may be worth saving the laptop hard drive image using the ghosting/cloning software once you have completed installing windows.
I know this way seems long but I've gone through the net and had answers of "it can't be done" or "boot from USB (which is not an option anyway!)", but this is something I've learned by experience, not assumption.
Hope this has helped if you still require it
And if you want a blow-by-blow instructions, then mail me