I actually tried a few solutions and its kind of strange, and might take a lot of coffee time. I'd note i've had a few failed attempts, and have warned where things get dangerous. Read through the whole answer before you tried it. This particular process is safe, as long as you keep in mind why things are being done.
I basically created a second partition, installed windows there from the original partition, and used that to bootstrap the windows install back to the original partition. I've cheated a bit, and cleaned out, but not formatted the old windows partition, since its safer first, though I've posted an answer where I reformatted the drive as well.
You'll need a windows iso, 7zip and some software for resizing drives (I used minitools free from inside windows). You'll also be using things in system properties a lot - you access this by right clicking and my computer - so get familiar with this.
First extract the contents of the windows iso using 7zip into a folder (if you have it installed - rightclick on the iso, and select "extract to" copy this into your tumbdrive. You'll need to use this more than once so keep it handy. You'll also want to keep the minitools installer here.
Install minitools on the current, working system and use that to create a new partition with free space after the current install. You want this to be at least 2.5 gb, and file system dosen't matter all that much since you will be installing a temporary copy of windows XP inside this (in theory, you could make a big partition, install windows XP here, and just work off that. We're assuming though, you want a single, large, functioning windows XP partitions, with a single pc, no external boot devices, and a windows iso. This will make you reboot once, and go back to your current install of windows.
You can now bootstrap the windows installer from windows itself - go to the folder you extracted the windows iso from, and run setup - be sure to select "new installation" rather than update.
This will do some stuff, reboot, and get you into the text mode setup. In text mode setup, once again, select new installation rather than repair.
Install xp into the new partition - this gives us somewhere to work on the old partition from. Unfortunately, since the old c: contains the bootloader and the windows installer files, getting rid of it is going to be slightly tricky.
Boot into the new install of windows, and we can start trying to work on clearing out the old install. Since this is a disposable install of xp we won't be using for long, don't bother with particularly correct settings or activation.
We need to do a few small changes to the second install - its still using the pagefile from our old drive so we need to get rid of that, go to system properties, set no pagefile on c: and automatic pagefile on
This is where things get dangerous. If you mess up, you can be left with an unbootable system. We're in the working install right now - and the bootloader is in the other install. The first is a safer option, and should give you a fresh install of windows without too much risk. I'm currently trying to work out how to safely format a system disk, since if you're reformatting cause you have a virus, a simple clear out of the system may not be enough.
If you want a fresh install, rather than a real reformat, things are reasonably simple - delete the old files, other than reformatting, and run setup again from our working install. From the new install (on mine this is set as f: even on the new system), delete all the visible folders on the old system (Documents and settings, windows and program files are what I see on a fresh install. These need to go) . If you can see ntldr and boot.ini , leave them alone. You do not want to taunt the bootloader. Its the one thing we can't fix easily.
When you get into the text mode installer, select c: as your install location (no reformatting), and install it there, going through the install process and the settings again. We're almost done things the 'safe' way, and are in your new, fresh copy of windows. Now, we just need to get rid of our working copy of windows - we can simply remove it from boot.ini(startup and recovery from system properties), set the pagefile back to c: and delete and merge the partition with minitools.
I'll update the answer, when I actually manage to format c:, rather than getting a fresh copy up.