Are you trying to install on Windows XP (Win 2003 Server)? Or a Windows XP workstation? TD will not install on a workstation. The only method I know to get this configuration is to use VMWare. It allows you to use any platform you desire in a virtual window on XP.
Success is the ability to go from one failure to another with no loss of enthusiasm.
~ Winston Churchill ~
Test Director doesn't support Window XP as a server platform not in TD version and not even in Quality Center.
In Mercury site they say that Windows XP is a client platform only and not a server so even if you manage to install it on Windows XP they will not support it.
Try to use any other OS for your server.