Have you tried hiding the Win XP partition, then re-installing Dragon Naturally Speaking? I am not sure if the disk management utility in W2k can do this on its own, but if not a copy of (eg) partition magic will be fairly cheap and do the job on the fly.
It is possible that Dragon is looking for Windows, and confusing your XP partition with the 2k one. If I recall correctly, the default %systemroot% on a 2k box is WINNT, which may be throwing dragon on install if it can find a “Windows” on the same box! If it can’t find “Windows”, it will be obliged to co-operate with your W2k “WINNT” installation. It may be then, after training Dragon, that the program will work successfully without hiding the XP partition, once all the registry hooks have been established.
Hope this helps.