Thanks all. The first time I attempted this there was one large partition and one small (around 20 Meg). I deleted both, created a new, single partition, formatted it then attempted the re-install of XP. Subsequently, only one partition showed up during other attempts. I did the same - deleting, re-create a partition then format.
What I don't get is that in the early days, I did a fresh install of XP using the same DVD and it was fine. This does suggest that either some trace od Windows 7 on the Dell Mini 9 is causing a problem, or that using Windows 7 on another machine to create the bootable USB somehow doesn't work properly.