You can't format the boot partition from within the OS running.
Look in the BIOS - you should be able to set the boot priority to CDRom first, then HD. Then when you boot there should be a screen which says "to boot from CD, hit a key." If you have certain Dell models - you're screwed because the CDrom will detect an OS already installed on your HD and will circumvent the format process.
I suggest downloading a Linux distro like Slackware 9. Boot from CD, log into root, cfdisk, and blow away the partition.
Likewise, you can buy a $9 2.5" HD adapter, disconnect the CDRom from a desktop, connect the laptop HD in its place, then blow it away under XP.
BACKUP ALL DATA, especially bookmarks, email, game saves, music, pictures, socuments, etc. before blowing away your old drive. If you have the disk space, run the system utility 'backup' and make an image, then burn it onto DVD - just in case you decide to roll it back.
Personally, the easiest way is to just buy a new disk drive. Chances are that you can get a bigger laptop disk drive for less $. Remove the old one, install the new one, safeguard the old one - just in case.
http://www.newegg.com/ProductSort/SubCategory.asp?SubCategory=380&name=Notebook-Laptop-Hard-Drives