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Wouldn't bother with the format, have never EVER known a formatted hard disk make any difference to whether your PC will boot from a CD or not! (and I install XP about 20 times in an average week!)
Sounds like your restore CD is not bootable for some reason. either this or your BIOS still hasn't picked up the boot order change.
Do you see the prompt when it asks you to press a key to boot from CD?
Next thing I'd do if I was you is to "Borrow" an XP cd from a friend and see if your machine boots from this, then install XP using the OEM sticker off the side of your case.
Could always try your "bootable" restore cd in a friends PC as well.
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