I've seen a similar issue with recovery cd's. When trying to boot up and use the recovery console it tries to use the Admin password on the installed OS. If the partition is corrupted, no password you try will work.

If the system will boot up you may be able to run a Linux based password changer on the system. There is one called NT Tools that works on XP. I don't have the link handy, but you would have to download and burn an iso to use it (won't fit on a floppy).

You may try proceeding a little further into the XP Setup to the point where it shows the partitions on the hdd. It should say NTFS. If it says UNKNOWN the partition is hosed. There is an NTFS bug in pre-SP1 of WinXP. The article number is Q315403. They released a patch to fix NTFS.sys running on ide hdds. The bug can cause it to intermittently crash the OS and display Unmountable Boot Volume on a bsod.

Regards