Check your SATA setting in BIOS. Is it IDE or ACHI? The reason Scenario 2 fails is because you disabled the secondary controller, which is what the blue SATA ports are on. Make sure you are using a version of Windows XP that has SP2 on it. I ran into some problems installing on my computer too because my Windows disc was before SP2 came out. Also, try hitting the F6 key when XP install is loading all those drivers on the blue screen and load the Intel Matrix Storage drivers on the floppy disk that came with your mobo. Good luck.