Did not notice this post from you yesterday. I think that the reason for the above is too little RAM. 1GB is not enough for proper operation of Windows 7 or Vista over time. I also think that a P4 which even if HyperThreading is a monocore processor and better suited for Windows XP than Vista and 7. It would of course help to bring the RAM up to 4GB, but I think it would still lag.
Oh, another information to clarify the settings in the BIOS. The IDE setting is sometimes referred to as 'Compatibility' instead of IDE. I am as I mention a little uncertain as to this being the case as the disk would normally not show up in the Windows XP setup at all. I came to think of one thing though as you mention Windows 8...
It may come down to while installing Windows 8, the disk was changed to GPT (GUID Partition Table) instead of MBR (Master Boot Record) which XP expects.
If that is the case, You should try to use a boot disc/USB if you have access to one, or insert the disc into another computer and change the disk type from GPT to MBR.
the following is an example screenshot just for the illustration:
As you can see, the disk here is MBR, and I snapped the menu as well to show you that there is a choice to convert it to GPT. This choice will be MBR if the disk is GPT.
One program supporting this is the freeware Active@Partition Manager.
I know the above may be a tad advanced and if anything is unclear, just get back to me and I'll try to explain it better