Agree with Peterloo method using nLite for xp (vlite for Vista users). Another way is to get an AIO creator (All in One) great program simular to the nlite.
AIO creator for installing OS's can add onto 1 dvd anything really for an example heres my winxp installation dvd:
WindowsXP Pro installation
Sp2 (at time of making this sp3 wasn't out)
open office
Photoshop lite
Firefox
Opera
Divx
Eset Security suite
Internet download manager
MSN live messager v2008 build 8.5
VLC media player
Klite mega codec pack
Foxit pdf reader
Peer guardian 2.0
Ulimate defrag
Uninstaller 2008
Save data.exe (all my docs rapt up into an exe file to install later )
When installing windows it will install all the above in the order i put them once install finish everything is uptodate
Makes reformating/reinstalling windows and all your favourite software a breeze, no need to even be in front of the PC while its installing. Just a few clicks and leave it.