Yes. In the olden days you had to use C (which is nothing more then the first harddisk) but modern PCs/bios don't have this limitation. You do still need to have one OS per partition. Put XP on first, then install Win7. You should then have the standard win7 boot menu to chose which OS you want to install.
A slight caveat: Whichever OS you boot, it will see its own partition or drive as C: unless you do some nasty and risky things which I strongly recommend against, having done them myself in XP and decided that it is much too risky.
So, if you have exactly two partitions or disks, when you boot XP then the XP system disk will be C: and the Win7 disk D:, and when you boot Win7 it will be the other way around.
Community: Am I wrong about this if Win7 was installed on top of XP?
You can't install win7 on top of XP. You have to format or use a different partition. yes, they do label the drives different. I tend to use labels so it doesn't bother me much. I'll just have to name them twice. My new case just arrived, so next week the parts go in, and in two weeks from now I should be dual booting.