The complete error is:

Error starting program: C:\windows\setup\setupapi.dll file appears to be corrupt, reinstall the file and try again.

This problem will occur of the Setupapi.dll file is missing or corrupted.

To workaround this problem, restart your previous operating system and rename the Setupapi.dll file before trying to upgrade. For Windows 98:

1. Select your previous operating system from the boot menu.

2. Start / Programs / MS-DOS Prompt.

3. In the MS-DOS Prompt, type the following commands, pressing Enter after each one:

cd setupM
ren setupapi.dll setupapi.old

4. Run Windows XP Setup again.

NOTE: See How do I install Windows XP?