It really sounds like your o/s is in a mess. You shouldn't have to keep reloading the driver software. Like I have said before (and IMHO), ME is a crap o/s, full of nastiness and guaranteed to give you headaches when it does decide to go wrong.
As to XP, well don't go for an upgrade because you really want to start from scratch. If you already have some trojens, there is a chance that you will have others that don't affect ME, but will do damage to XP, given the chance. You also may want to reload it at some point in the future without having to load ME first. So backup any essential data and FDISK and format the drive. There are 2 flavours of XP Home, the full retail version, which gives you support from M$ themselves plus you can transfer it from one machine to another (although it must only be installed on one machine at a time, per license). Then you have the OEM version. Support is only provided by the people you buy it from (ie. You will probably get no support) and it is only valid for the machine that you first install it on. Now this isn't as bad as it seems, considering that you get several (3 I think) goes at activating the software without any intervention. After that, you will receive a message asking you to contact M$ for a new product key. I have had to do this numerous times for customer machines and have never had a problem getting a new key. In fact, 4 out of five times it is generated by their automated system without you having to speak to anyone.
There used to be a big difference in price between retail and OEM, but if you do a bit of googling, I think you'll find the retail for about £80 and the OEM at around £60.