I am posting this as a solution, this is not a request for assistance... I got this from the 'Geek Squad' at a local Best Buy (Concord NH).
This (reportedly) applies to all Gateway 7000 series notebook PCs (this problem actually happened on a Gateway 7322gz), with a Pentium 4 CPU (NOT AMD).
These notebooks can restore 'Windows XP Home' via system prompt (at bootup, you press a key to restore XP - this does not refer to a 'System restore'
after XP is loaded, this refers to a full reinstall of XP done via a keypress BEFORE XP loads, at system bootup).
IF the system actually NEEDS to be restored, you MUST first enter the notebooks BIOS and disable Hyperthreading BEFORE the system restore can succeed. The restore will act like it is
trying to succeed, but will get partway through updating hardware and ... the notebook locks up.
Evidently, P4's hyperthreading features are not Windows XP installer compatible or vice versa.
HTH