If all else is properly configured,then download the hitachi DOS hd utility
(all hd
mfg have one),download and install to a MS-DOS formatted floppy,boot the
machine to floppy,run the tests,also run the format or burn in
application(s) for
the hd...After,reboot to xp cd,install xp.

If the problem was the hard drive, it needs to be partitioned (one
partition or more) and formatted before it can be used. There is another
consideration though - the Compaq recovery program. While there is nothing
wrong with using that drive, the recovery program may or may not work with
it. Just depends on how "fussy" the Compaq recovery program is about the
drive being different than the original equipment.

So the first thing to try would be creating a partition. If at all
possible, make at least one partition that is as large as the original
drive. You could try running recovery at this point (it may do the
formatting automatically for you). However, it the recovery program still
refuses to run, format the drive and try recovery yet again.  

If you had the retail CD, the tools to partition and format are right on
the XP CD. Since you don't have that, you could try Hitachi support for
similar tools or check out  www.bootdisk.com for a suitable replacement.

As for formatting, decide what your target file system is going to be. If
headed towards NTFS, you may have to format as FAT32 first and then convert
to NTFS later. How this all plays out is dependent on what tools you're
able to gather up for partitioning/formatting and what options those tools
offer.