Windows XP Home won't allow login after installation, domain error

I've recently installed Windows XP Home to a computer which was previously equipped with Win XP Professional. There was a minor glitch during the installation when the installer refused to delete the C: partition because there were some installation files present. This was possibly caused by inserting the install CD into running computer, the installer then copied some files into C: and expected to put Windows on a D: or E: partition. After reset a new installation started and run OK. Unfortunately, I couldn't log in into the machine although I haven't set any password for the only user account set up during installation. The message was "Domain does not Exist" with "smart" advice to contact system administrator. I've found several questions posted on the web regarding the same problem but no real answer to the problem. The trouble is, I have not set up any domain and Win XP Home officially does not even support domains!
My conclusion was that the installer somehow picked up some remnants of the previous Win XP Pro system (which does support domains but on this PC was not using them) and malfunctioned.

So I've done a reinstall with following steps:
1) format not only C: but also D: partitions;
2) full format on C: to NTFS before system installation begins (i.e. not the fast formatting option); it takes about 12 minutes on a 50 GB partition;
3) different user name from the previous (XP Pro) system.

I'm not sure whether these steps are all necessary or which one did the trick but after second installation everything works as it should.