WinXP Reinstall Questions

After last Microsoft Update my sound no longer worked. Realtek AC97 Audio Driver Version 5.10.0.5910.
I used the email tech support from Microsoft and none of the suggested steps fixed the sound. Most I had already tried before I contacted their support.
Driver update they suggested did not fix sound. After sending them Screen Shot & System info this was their suggestion:
Download the sound card driver from the link below:

http://h10025.www1.hp.com/ewfrf/wc/...&dlc=en&cc=us&os=228&product=3199127&sw_lang=

Since my PC did not come with a Win XP Home CD when I bought it new they sent me a Win XP CD. Got it today and I put it in and got this message:
Setup cannot continue because the version of Windows on your computer is newer than the version on the CD.

Warning: If you decide to delete the newer version of Windows that is currently installed on your computer, the files and settings cannot be recovered.

So I have not done anything yet.
What files will I loose? Would this be like starting with a new PC? I really don't want to do that if I don't need to.
Not sure what I should do now. Suggestions?
Thanks!