There is a setting in the configuration area of Power DVD to set the default drive letter. However, Power DVD has a bad habit of changing it back the first few times after it's set.
Also, you may want to check the properties of your DVD-ROM in Windows and make sure it is recognized as a DVD-ROM.
It would also probably be best to install the ASAPI layer for Windows XP. The ASAPI layer allows ATA devices to interact with software such as DVD and CD-RW software. Sometimes it's needed, other times it's not. You can find the latest ASAPI layer from Adaptec in the downloads section of this site.