If the drive is 10 years old you can skip the whole deal booting from the CD. Just go buy another drive (make sure you get an IDE drive and not a SATA drive), you won't be able to salvage the old one. If you're lucky you'll be able to get the data off the old drive.
Remove the old drive from the machine (unhook it) and install Windows on the new drive. Then plug the old drive back in (you'll probably have to change the jumpers on the drive to set it to slave since it's going to be an IDE drive). Make sure you DISCONNECT the old drive when installing Windows to make sure you don't copy over your data (done that before...not good).
If you can read the old drive copy the data off of it, and then recycle the old drive. If you have sensitive data on it either run Darik's Boot and Nuke on it, or drill a hole through the whole thing.
You're drive probably has MANY MANY bad sectors on it. It's dead...probably past dead. One of the bad sectors contains data required to boot Windows which is why it blue screens on boot up. You will need to recover that data and move it to a new sector to get Windows to boot. You COULD do that with SpinRite (it will attempt to read the bad sector and then move the data to a good sector), but that costs more than a new drive, takes FOREVER to run (we're talking days or even weeks) and you're going to have to toss the old drive anyway.
When you get a new computer, I'd set up a main drive as the OS drive and then get TWO drives of the same size for DATA. I keep all of my data on a drive other than the OS, and mirror them.