Once you get into the bios and the boot order you may see floppy, cd rom, and hard drive in that order. You can change the first if needed to hard drive and disable floppy until or in case you need to boot up with one.
When looking in the integrated peripherals or similar section outlined in the user manual you highlight the hard drives item and press enter to bring up a screen there. The + and - keys on the NumPad or those designated are used to bring the sata drive to the top of the list to make that the default hard drive and boot device there. If you have two satas you would move the OS drive to the top.
When booting up in Windows you should always see C for the Windows drive with only one copy of Windows installed. Windows should see the zip drive as floppy and optical drives as something other then C. If the boot files are one drive or a first partition and Windows was installed onto a second that would be one instance for seeing the default as something other then C.
With Vista on the first of two satas here XP was seen as D when installed while the Vista drive(ide at the time) was plugged in since the Windows installer will look for an ide drive first if present. Somehow the wires got crossed when you installed Windows there to be seeing XP as E.
Here I unplugged the ide drive then and proceeded to reinstall XP as a stand alone on the first sata to then see it see itself as C while booted in that version. Once the Vista was replugged back in XP added that as a new hardware found and saw that as F. When in Vista XP was seen as F. That being due to two optical drives taking D and E.
Not knowing you had just bought a new drive I was looking at possible wear on an older drive as a possible cause there. It sounds like you are running an old card on a new board that supports an AGP 8x/4x card and would be a step up going for a new 8x model in the long run. The fact that picture has returned shows that the card is still good however. If the problem returns it would be most likely the card itself now showing itself as being on the way out.
The other problem of course is a likely need to unplug the zip drive as a possible cause for seeing Windows as E not C. Since zip drives use the ide not floppy cable the Windows installer saw that as an ide device overriding sata and automatically assigned that as C. If you do end reinstalling XP first unplug the zip drive until finished to see if C is then seen in Windows.
The boot order section of the bios is easy there where you highlight the first to bring up that menu to set floppy, cd rom, hard drive where you simply change that to cd rom or hard drive usually hard drive with the second cd rom and third disabled. If your board as it should have the press F8 option to bring up a boot device menu seen next to the press DEL to enter bios setup at post you can simply leave the boot order at hard drive and bring that menu up to select the optical drive the XP install disk is in when going to see Windows corrected. When the setup files are finished being copied there's no need to re-enter the bios to change the boot order since hard drive is already set. The Asus A8N Deluxe in the last build here as well as the Asus model now used see that menu.