What I would do before you go any further is back up any data that’s on there, whilst you can access it. If there’s been an infection on there, don’t open anything on your laptop in case it migrates across to yours.
Can I assume we’re running XP on both machines?
I don’t suppose you know the name of whatever was found by MSE?
You can rewrite the MBR on a slave drive using the tool here:
http://www.ambience.sk/fdisk-master-boot-record-windows-linux-lilo-fixmbr.php
… with the caveat that I haven’t tried this personally. XP has this functionality built in (“fdisk /mbr”) but only for the boot drive, not a slave.
If you can’t see the drive when booting from the XP CD, this could be down to it needing SATA drivers. Similarly when it’s connected to yours, it’s not mounting USB drives.
What make / model is the affected PC? Is it another laptop? Where I’m going with this is, there might be a manufacturer-specific ‘recovery disc’ which has the same functionality and has the correct drivers built in.