Windows 7 creates a small "hidden" System partition on which it places the boot system files, bootmgr and the folder Boot. Windows XP needs to have access to that partition so that it too can place it's boot system files there. They are ntldr, boot.ini and NTDETECT.COM.
As you have a second hard drive on which to install Windows XP, you will need to create a partition on it to install XP. Do not actually create a partition or format it from within Windows 7 as Windows XP uses an earlier version of the file system NTFS.
Insert your Windows XP setup disc, restart your system and boot to your XP CD to install Windows XP. When you get to the set-up screen where the drives/partitions are listed, select the unpartitioned space on the new drive and create a partition by pressing C on the keyboard. Once the partition is created, press Enter to install XP on that partition and then format the partition.
If the drive is already set as one partition and formated then delete the partiton and recreate and format it with the XP CD at the setup screen.
Create a Dual Boot Menu using DualBootPRO
Once you have completed the installation of Windows XP you will have temporarily lost your ability to boot into Windows 7. You will now need to restore a dual boot to both Windows 7 and Windows XP.
It is recommended that you install all device drivers in Windows XP or at the very least, the Chipset drivers for your motherboard. After that is done, download and install DualBootPRO click here and be sure to follow the prompts to install the applications Prerequisites, .Net Framework 2.00 or higher, as DualBootPRO will not run without it.
Open DualBootPRO, ignore the prompt to backup your BCD. Go to the System Bootloader tab, select "Windows Vista or Windows 7 Bootloader" in the first section and "All Drives" in the second section and then click Install Bootloader . Next, go to the Diagnostics item on the menu bar and select "Run Diagnostics". DualBootPRO will default back to the Manage OS Entries page and you will see that you now have entries there for "Windows 7" as well as "Earlier version of Windows". Change the name of the Windows XP entry using DualBootPRO if you wish. Restart your system and select the operating system you would like to boot to.