You cannot isolate an OS with partitioning software. If you want two partitions on 1 HDD, then you use the partitioning software to create 2 primary partitions your HDD. Then you install the OS to the partition you prefer.
If you want to dual boot XP and Win7, then install XP first to one partition, and then install Win7 to the other partition. By installing the OSes in that order, your boot loader will allow you to select the OS you want to boot after POST.