@OP
I thought that your optical drive didnt work only in windows. So I suggested using a bootable CD, so that it can still boot from the CD, and you can repair your windows like that.
You can boot from a USB device, but your motherboard has to support it. That has no relation to your windows, since booting is PRIOR to loading windows. You better check your bios to see if there is anything mentioned about USB boot.
You can install XP from bootable USB. The tutorial you have mentioned is something I tried long back, and it worked.

Good luck reinstalling