Requirements: ... A working Windows system
Well, I had assumed that machine you were having problems with wasn't the only Windows machine in existence.

Should be able to follow the process in a Windows VM, or a friends system, or any other Windows machine.
I've had trouble with slipstreamed installs. I can't remember now what they were, but they were weird.
Service pack slipstreams, or other hotfixes? If the slipstream creation processes is done right, the end result will be the same as a retail XP disk with SP3 integrated. I have seen issues as well trying to slipstream other pieces in, but never with the bare service packs.