Hello and welcome to TSF...
First thing you need to do is to test RAM sticks and HDD...
To test RAM, use MemTest86+
http://www.memtest.org/
Check what make/model is your HDD, visit manufacturers We Site, download diagnostic tools and test HDD for possible bad sectors...
Also, take out RAM sticks and clean the contacts with rubber eraser...
Clean the heat-sink with compressed air from the dust as well as inside the laptop very carefully...
You can update BIOS with Floppy Disc... But I guess you need an external Floppy Disk Drive unless you have one built in laptop [since you said you have not been using laptop for over 3 years, so its a bit older model]
Visit manufacturers Web Site and obtain latest approved BIOS update...
have you tried to disable ACPI in BIOS???
If not, do that and try to install operating system...
By the way, are you trying to install Retail version of Windows XP or OEM one???
Keep us posted...