XP boot loop

I'm stumped big time and I hope someone can help.  I posted this in the general hardware section and got no answers.  Maybe someone here can be of more assistance.

I have an out of warranty, 3 or 4 year old Dell Dimension 4700. Recently, I was having a problem where Windows XP gets stuck into a boot loop.

Originally, it would boot to the Windows XP screen where the progress bar then simply reboot and get stuck in this loop. It would boot into safe mode fine.

I ran a hard drive diagnostic and I received an message saying "hard drive fails, error 7." I looked this up online and the gist I got from various dell forums that this was causing boot loops for other people and the drive was failing--and would eventually stop working altogether.

I have now purchased a new hard drive from newegg. I installed it and installed Windows XP back on it. The install seemed to go fine--I got into windows xp normally. I went to install my wifi card with the linksys CD, and midway through installation, the computer shut off, and I am back into the boot cycle again.

Obviously the hard drive wasn't the problem. However, before I invest any more money into a, for all intents and purposes, worthless machine I need to know what else could be causing the problem?

Thanks in advance.