To take your first point, it sounds like you've already partitioned a dive, but have not specified a mount point. If you want to do it that way, you need to click on the "Advanced" button and define a file system type and mount point - for example ext4 and / (which is root or what would normally be a "C" drive in Windows).
Ubuntu is trying to do as you ask, but you haven't told it the full story.
Be careful of /dev/sda - it stands for device scsi drive "a", in other words, your first sda drive which is likely to be "C" (the whole drive). If you've already partitioned it, you should be able to see /dev/sda1 /dev/sda2 and so on. The 1 and 2 and whatever, defining the partitions on that drive. You then need to define the correct partition to install the system on to.
Along side will (as far as I know) change your MBR. Along side means "as well as" in this context. That's why if you're doubtful, you need to get a suitable application and back-up your MBR to a USB drive or something, so that if push comes to shove, you can reinstall it. Microsoft has no intention of allowing you to install an alternative system, and make it as difficult as they can for you. So you need to be one step ahead.
You can tell Ubuntu to install the boot loader on it's own partition. But then, you will have to tell Windows manually, how to give you an option to boot Ubuntu, or use a boot manager such as Boot Magic. In other words, using that method will not automatically, give you a multi-boot menu option.
As always with a dual boot installation, back-up everything that is important.
Finally, if it were me and you're thinking of moving from XP, I would try Linux Mint in preference to Ubuntu. You'll find it far less of a culture shock! All the above still applies.