
After you've installed nLite, load your installation CD into your disc drive and make sure you've got your 25-character product key handy. Launch nLite, click to the next screen, "Locating the Windows installation." Before you go further, create a new folder somewhere on your computer, at the hard drive root (as in "C:") if possible. Click "Browse," select your CD drive, and you'll be prompted to copy your CD to a folder. Select the folder you created, then wait for the copy to finish.
NLite's next screen will ask what you want to customize on your install disc. If you only want to update to SP3, only click the "Service Pack" button. But unless you love answering questions and never touch a setting in Windows XP, you'll want to flip all the switches green and click "Next."
Now nLite will ask for slipstream files, or packages you want to integrate into the installer. You'll always want to have the latest service pack available, since, for instance, Service Pack 3 incorporates the fixes made in SP1 and SP2, so it makes them unnecessary. If you grabbed the latest beta of nLite, you'll see a Service Pack 3 already offered for integration, but it's an older release candidate. Hit the "Choose" button, select the executable file you downloaded from Microsoft with the seriously long file name, and give nLite a few minutes to implement it. When you see the version number change, hit "Next" and move on.
"Hotfixes and Update Packs" is for all the tiny little Windows Updates between service packs. If you're including SP3, you can pretty much skip this part. But in the future, and for those not jumping onto SP3, I recommend running WinUpdatesList. You'll see a list of all the updates you've installed, and sorting by date and type should show you what you've installed since the last service pack. Right-click on an update, and you'll get a link to a related Microsoft Knowledge Base article, where you should be able to download the fix directly and patch it into nLite. You can also roll executables for Windows updates—like Internet Explorer 7, which (still!) doesn't install by default—into your disc.
You start really making your XP system your own on the next screen. The "Compatibility Window" that pops up can protect you from yourself; unless you're sure you can do without an item, you'll want to leave it checked. Behind it, the "Remove Components" section is where you can pull out all the stuff you don't ever use or don't have. Most of the savings are small in hard drive size, but keep your system from clogging with services and drivers it doesn't need. Among the almost-guaranteed safe removals:"Briefcase" from Accessories; most of the non-red items in Hardware; Keyboards and Languages that you don't ever plan to use; "Tablet PC" from Multimedia; and MSN Explorer and Windows Messenger from Network.
Up next is the "Unattended" section, if you checked it, and this one requires attention to detail. If you want to set and forget your XP install, change "Unattended Mode" to "Fully automated," but then move slowly through every tab, filling in every section you'd expect to get prompted for during install. You can fill out your Product Key in advance here, and you'll also want to check "Skip OOBE" (Out Of Body Experience, or the introduction tour). Fill out all the name fields in "Users" and "Owner and Network ID," and make sure to set the time in "Regional." Once you're content you've pre-empted your installer, click "Next."
You can pretty much leave the "Options" pane alone, although I enable the "merge" option by way of hoping for a smaller package. The "Tweaks" options are up next, and while I can't tell you how to customize your desktop, I'll note that you can basically set up your desktop, Start Menu, Internet Explorer and lots of other Windows tweaks from these prompts. Check the bottom bar for descriptions, and fear not—all of these can be undone, and we've posted a good many here at Lifehacker.
Hit "Next," and you're almost done—click "Yes" to start the bundling process. Once that's finished (about 7-10 minutes on a faster computer), you can click through to make or burn an ISO file. Before doing that, gather up any files you want to keep on the disc, like that finicky printer driver or your favorite app installers, and place them in their own folder in the directory where you copied your original XP CD to. Now hit "Make ISO," choose where to save the image, and then burn it to CD or DVD using your favorite utility, like the free ISO Recorder.
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