Pre-SP2 Win XP can't read over 127GB on a hard drive.
No. It's Windows XP RTM (no service packs) that doesn't support 48-bit LBA. SP1 or SP2 will support it.
But, even after the service pack is installed, that won't change your current partition size. You will have to either:
1. Expand the partition using Partition Magic or BootItNG.
2. Make a Windows XP slipstream CD containing SP1 or SP2, and reinstall Windows, repartitioning during installation to the full size of the drive.