well first of all, check if ur mobo can support sata 2. if it doesnt, and ur hard drive is sata2, use a jumper to select sata1 functionality. (check maunfacturers website for details...ive installed 160gb and 250gb sata hard drives with xp in fact im on a pc with xp and a sata hd right now.
As shovenose says, first item to check is whether you need to manually force the HDD unit back into original "SATA I" mode.
Then you have another issue to check - which version of Win XP? If you have only the original version with no Service Packs installed, it does NOT support a feature called "48-bit LBA", and hence you cannot create and use any hard drive Partition over 128 GiB. Now, depending on how you plan to set this up, there are a few options for that case. However, if you have any Service Packs installed or included in the XP disks you have, skip this because it is NOT an issue as of Service Pack 1.
The other part of this is, what do you mean by "install"? If you mean you are putting a 1 TB blank new disk unit in your machine to be its only drive, and then installing XP on this new drive (plus everything else like application software), that's one thing. If you have a fully functioning system running XP and want to have the new drive unit take over the sole drive function, retiring the old drive from use, that's a second route. Or, if you plan to continue using the system as it is, and just add a second hard drive that will be used only for data storage, that's a third scenario. Each has its details to set up. So, let us know your plans and we can advise. In doing so, it might help for some details if you also tell us the exact make and model of your computer and its motherboard, and of the HDD unit you are buying.