The notebook was used for 3 years for Red Hat , including GRUB for booting. It has no Windows CDs but instead a protected part of hard drive for Windows reinstall. Because of new work, the PC is being reused with Windows XP, but the boot section (which still contains some GRUB stuff) is not being handled properly by the Windows reinstall mechanism.
Knoppix cannot see the part of the hard disk that precedes the Windows section. Apparently the very beginning of the hard disk, where the boot occurs, is not accessible.

(After the "Blue Access IBM Button" to restore to factory contents was used, a boot just goes to a dead prompt that looks like:
GRUB>
and does not respond)

Is the section of the hard drive that contains the Windows reinstall section right next to the section of the hard drive that boots?

Take a look at these links:

http://www.softwaretipsandtricks.com...ootloader.html

http://www.chrisburgess.com.au/reins...xp-bootloader/

https://www.linuxquestions.org/quest...loader-286486/

You must realise that the 'first' section of the harddrive is called the Master Boot Record, and normally is not overwritten. In order to install linux, most bootloaders like LILO and GRUB install themselves there!

Anyway, grab any copy of XP and follow the instructions in the above links, should sort you out. Be careful not to wipe the recovery partition of your system! If it's gone, you will have to purchase another copy of XP

All good in theory. Even if you can find someone else with an XP disk (any one will do) it may not boot. The Windoze installer checks for the boot flag, and dies (quietly) if it doesn't find exactly one partition marked thus. Easily enough fixed if you're handy with Linux tools.
Best solution might be to go get supergrubdisk and use that to boot into the first (recovery) partition. Should be all automagic after that.

I now refuse to buy laptops that don't come with a full OS licensed CD/DVD; this is just such a stupid situation to put users in.

I agree with syg00 there, I would not buy any machine with only recovery partition either. I learned this to my shock and horror after my HP laptop with ubuntu and vista went tits up because the hard drive failed! painful experience, but it can be overcome!