Both XP SP1 and SP2 support LBA (Logic Block Addressing) which allows the computer to support hard drives larger than 127GB. The software is not the problem. I just made a server with XP Pro SP1 and have 2x250GB SATA's in RAID1, and it works no problem. My guess is that your motherboard doesn't support LBA. Since its not SATA, and its IDE ATA 100, my guess is that the motherboard is a bit on the older side, and it doesn't support LBA which has a limit of 127GB. You can do one of a few things:
1. Check for a BIOS update for your motherboard
2. But a IDE Controller Card which will allow you to see the full size
3. Or, partition the drive into 2 partitions.