Is it possible? Is there a performance issue? I hear that people have alot of problems with WinXP 64 bit so I would rather get 32 bit but I don't want to need to sacrifice CPU power in order to do so
Yep, you totally can. I would recommend an Athlon 64, because they have 5 different modes and 2 specifically geared for 32-bit mode. An Athlon 64b also outperforms an Intel counterpart (even Conroe) by up to 40% in 64-bit, so when you migrate to x64 in the future, you will still have the best.
~~Mad Mod Mike, pimpin' the world 1 rig at a time