There's no way for a backup program to reliable backup every file that an installed application needs, and most applications these days require a proper installation routine to create Registry entries or specific files that can't just be copied, or place shared files into the right directories.
If you have a brand-name computer build, it should have come with a recovery CD which at the minimum images the original hard drive to a replacement drive in case of failure; better ones may come with a CD containing the actual installation files for all the applications as well.
One solution is to perform a real backup using CDs. WindowsXP does come with a marginally useful backup application; it can't backup directly to CDR natively, but if you run an application such as DirectCD that allows packet-writing, then you can use it to backup to a file on CD. To fit on one disc though (since it won't be able to span CDs) you would need to deselect non-essential items that you can easily reinstall, and preferably backup your own data files manually by writing them to CD, so that the real backup doesn't waste that space.
A real backup app that supports CDR is of course the best solution.