There is another possibility.
Your problem may lie with the hard disk, Ata 66 or 100 controller or SCSI bios.
If Windows 2000 installs its startup files (Ntdetect.com, NTLDR, Boot.ini, etc.) on a partition with more than 1024 cylinders, or accessed only through Ata 66 or Ata 100, it cannot find them at the time of booting the Graphic User interface.
You get "A disk read error has occurred."
It cannot find them because the Int-13 extension in not active and it needs it to be able to read the hard disk.
Also Ata 66 and Ata 100 plus controllers drivers are desactivated by default in Windows 2000 at startup and it cannor read the hard disk.
Solution: check your SCSI BIOS and activate INT-13 extensions calls; or install with the hard disk on standard primary controller.
Optimally use "Partition Magic 5.0" and re-partition the whole disk. Otherwise use fdisk to the same effect. You may choose fat up to 2 gig, Fat 32 up to 32 gig or NTFS.