So you want to cut off the branch whilst sitting on it?
You cannot format the win drive within win
You can format any other drive within Disk Management
You're trying to format the drive containing the system volume from
within WinXP. You can't. This would be the computer equivalent of
sawing off the tree limb you're sitting on, and WinXP is "too smart" to
allow this.
Simply boot from the WinXP installation CD. You'll be offered the
opportunity to delete, create, and format partitions as part of the
installation process. (You may need to re-arrange the order of boot
devices in the PC's BIOS to boot from the CD.)