What version of XP did you use? did you use an nLite modified or standard?
Did you remove the other I386 folder?
Did DOS load at all? if not, try starting from the beginning, format, install DOS and copy the I386 folder. DOS can be termpermental enough file moves with another OS (in the desktop) and it will refuse to boot.

Hurray its up and running. I forgot it had to install the OS itself. I did and it is great. Thanks William for all your help.

It can be a hassle dealing with DOS, but it eventually does work.

I'm glad you were able to get your computer working :)