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Windows XP Service Pack 2
When Windows XP hit the market, 130 GB seemed a comfortable capacity limit. However, hard drives started increasing their capacity tremendously and the 130 GB limit became more of a nuisance as days passed on. It seemed like almost every month a new hard drive would be produced with at least 10 GB more capacity. To solve this problem, Microsoft released a second service pack for Windows XP which detects higher capacities. Solving your hard drive problem might be as easy as installing SP2 and extending your partition to get the full blown capacity.
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You might not have a problem after all. The way Windows reads hard drive memory is with the following concept: each unit increment is equal to an increment of 2^10, or 1024. However, hard drive manufacturers label hard disk capacities with Kilo=1000 in mind. This means that if you have a 500 GB hard drive, you actually have 500,000,000,000 (or 500 billion) bytes, not 536,870,912,000 bytes, which would be 500 GB in terms of Windows. Instead, Windows will read your memory as 500,000,000,000 / (1024^3), which is approximately 466 GB. If you experience this slight lack of memory, nothing is wrong with your computer. It is simply your hard drive manufacturer interpreting the incremental memory values differently.
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Your problem might not be caused by Windows at all! You might have a problem in your motherboard that does not allow the operating system to detect how much memory your hard drive really has. If this is true, you will have to update the BIOS or get an entirely new motherboard, which can be a painful process. Make sure that Windows is not the problem, and, if it is not the problem, your BIOS is properly updated before going out and getting a new motherboard. To update your BIOS, you will have to download a new firmware update from your motherboard's manufacturer. For example, if have an ASUS motherboard, you can go to asus.com and click "Support" once in the global website and find a section for drivers and BIOS updates where you will find the proper update for your particular motherboard.
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After you check these problems, you might need to modify your hard drive's partition so that it is extended onto your current system partition (unless you would like to create another partition for other reasons). You can extend partitions using the Diskpart program in Windows XP. To access this program, go to your start menu, click "Run...", write "diskpart.exe", and click "OK". Once in the Diskpart program, write "list volume" and the program will show you all the volumes available on your computer.
Extending the disk will require you to know how many megabytes you want the disk to extend to ("size=n", in the "extend" command, where "n" is your desired number of megabytes). However, if you do not include the amount of memory you want to extend the partition to, it will just extend your partition on all unallocated space subsequently. If your volume number is "3", you should write "extend disk=3". This will extend your partition until the end of the unallocated space.