What you are trying to do it possible, but not easy for a total novice. Installing a fresh copy of XP retail is easy, just boot from the CDROM and choose "new install" and you will be given the choice to reformat the drive. When you are done, it will be fresh and new. Then, you can apply SP2 and the automatic updates, virus and adware scanners.
As far as saving your old stuff, that gets very complex. If your budget allows, get a brand new harddrive (HDD) and install the new XP on that, then use the old HDD as the backup (or D
drive, and copy your old stuff over from there. Once all of the old stuff is migrated, you can reformat that old drive use it as backup storage, or get rid of it entirely.
Migrating files is easy, but migrating applications and application settings can be hard, especially when those apps use the registry to store information. It is possible to get that info out of the old registry, but it's an advanced thing. Just reinstall the apps.
This should get you started.