That error message has been occuring with XP installations pretty much since it first came out.
You can run 32 biut OS on a 64 bit processor - just not optomised for it.
Suggestions?
1. Check to see that the drives are configured to use CS (cable select). Some boards don't like it if you've used the master/slave configurations. (I'd give this a try first in case it's trying to boot from the wrong drive while installing)
2. Try changing the cache options for the processor in the bios - sometimes this fixes it (you can change them back later).