This is an old post, but maybe my post helps for other users. I have the same problem, and I have searched through the Internet and I did not find any solution for my problem, therefore I made my own solution.
I have an ATI Radeon 7000 AGP card, and I tried to install windows XP + SP3, and during the installing devices section the setup hanged with the black screen.
I have booted my system using a boot disk (Hiren's boot CD -> Mini Windows XP), and then I looked into the end of C:\WINDOWS\setupapi.log, and it seemed, the setup hanged up during the ATI card driver installation (the driver comes from the Windows Install disk). It looked like this:
#-019 Searching for hardware ID(s): pci\ven_1002&dev_5159&subsys_2037148c&rev_00,pci\ven_1002&dev_5159&subsys_2037148c,pci\ven_1002&dev_5159&cc_030000,pci\ven_1002&dev_5159&cc_0300
#-018 Searching for compatible ID(s): pci\ven_1002&dev_5159&rev_00,pci\ven_1002&dev_5159,pci\ven_1002&cc_030000,pci\ven_1002&cc_0300,pci\ven_1002,pci\cc_030000,pci\cc_0300
#-199 Executing "C:\WINDOWS\system32\setup.exe" with command line: setup -newsetup
#I022 Found "PCI\VEN_1002&DEV_5159" in C:\WINDOWS\inf\atiixpag.inf; Device: "RADEON 7000 / RADEON VE Family (Microsoft Corporation)"; Driver: "RADEON 7000 / RADEON VE Family (Microsoft Corporation)"; Provider: "ATI Technologies Inc."; Mfg: "ATI Technologies Inc."; Section name: "ati2mtag_RV100".
And then I have removed the C:\WINDOWS\inf\atiixpag.inf, to make for the setup impossible to find a video card driver for my card, then I have restarted my computer, and let it boot from C: drive, the installing devices part restarted, and it wasn't able to find the driver, and it continued and finished successfully, and then I could install the graphic card driver later from the vendor CD in windows.
An alternative soulution would be to replace the graphic card before installation, or enable the MotherBoard integrated one, but I have only this graphic card.
I hope this post will help for others as well.