Disclaimer: I have little first hand hardware experience with laptops. I have plenty of experience with PC desktops, but I've been out of the game for a while, so I'm a little rusty. That said, here's my crack at our problem.

My first, instinct is that either your hard drive is corrupted, or internally the data and/or power cables to the drive are loose. Your computer POSTs, which is your computer checking to see what parts it has and making sure they are working when it first "wakes up" so to speak (Power On Self Test, runs from the BIOS). After POST, the PC/laptop then looks for where to find an operating system it can boot up. WinXP is typically installed on your Hard Drive. WinXP booting from anywhere other than a HD on a laptop is HIGHLY atypical, so don't worry about where else it might possibly boot from. Even if you had the OEM WinXP installation disk you could not run Win XP the OS from that CD.

So anyway, it follows that if your computer can't find or properly read the HD, it can't find an OS. DOS (Disk Operating System) is an archaic OS that older versions of windows used to run over the top of, as an easier user interface with the DOS kernel. WinXP is its own OS with its own kernel (the part of the OS doing all the real work behind the user interface: Think guy behind the curtain in Oz). There is no DOS. So to dispel any confusion, when the computer is POSTing it is not running DOS or any other OS, nor is it when you are editing the BIOS. You are simply running a program burnt in hardware on the CMOS chip: which is where your BIOS info is stored in hardware.

In my experience Phoenix BIOS usually would list No Drive if no drive was detected, i.e. if the data cable had come loose physically preventing communication to the drive. There might be a possibility that if your data cable is fine and your HD's power cable is loose then your BIOS might see a drive there but without power to it not read any info: displaying 0MB. I feel that this is somewhat unlikely. So, if your HD has power and data communication, but registers as 0MB it may very well be corrupted :-(.
(FYI: the zero with the dot simple differentiates it from an o, kinda like the / through a zero)

Here's the real trick to DIYS on this problem: you may very well have to physically disassemble your laptop to get at the HD inside and A) reconnect cables to it that have loosened, or B) get the drive's specific model and manufacturer info. If reconnecting cables is the fix, chances are your drive will then be detected by the BIOS and you'll be back in business. If your drive is corrupted then you may need its info to check and see if it has a manufactures warranty, or possibly try to find and run a low-level formatting utility from a CD or floppy disk. You'll then have to acquire a WinXP install CD, and reinstall on the fixed drive. Or, get a new compatible HD and reinstall. All this is really getting into the realm of the experienced PC power user/tech/admin. Of course if you open your laptop up, you have already dove right into the deep end of PC experience.

So what I suggest is finding a local with laptop experience. Sorry I can't help more. Hopefully this sets you in the right direction.
-Alien Jon