There are problems when you build a dual-boot system and install an older OS second. It will work, but you will get the XP boot process which, among other things, won't recognize win7 as an OS and won't offer the dual boot.
You can take any number of approaches; I will give a few
0) Do you want to dual-boot, or are you trying to wipe out Win7 and install XP INSTEAD? That one is simple; do as Hawkeye22 said.
1) Accept booting Win7 from an XP boot manager. Not recommended.
2) Run the XP VM inside Win7. It's free for certain versions of WIn7; I forget the lowest version of 7 that will run it.
3) Use a third-party boot manager.
4) Wipe your system, install XP, then re-install Windows
5) Use two physical drives. Disconnect the 7 drive from your system and install XP on the other drives. You will now have two bootable drives. Choose your boot in BIOS, or use EasyBCD to modify your Win7 boot to offer XP as an alternative.
6) Install XP and then use the Win7 distribution disk to repair your boot manager with the Win7 boot manager.
Lots of choices, depending on what you want to achieve.