Thanks again, Altrea. I assumed one could trust the readme file so I thought there must be another explanation. How silly of me!
Anyway, I checked into OS requirements for PHP and found that Win2k is not supported by 5.3 & later, so I looked thru the readme files of the earlier releases of xampp and found that 1.7.1 is the latest release which includes a pre-5.3 version of PHP. I now have xampp 1.7.1 installed and services started successfully.