Yes, FreeNAS will definitely work for your purposes. The only thing you may want to consider is getting maybe 2-4GB of ram in the xp machine depending on how big those HDDs are going to be.
I setup a FreeNAS server about a year ago. I have had nothing but great success with it. I am still learning tons about it but since getting basic file sharing setup (which is very easy especially with all the tutorials setup) I now have a FTP server, Bit Torrent Client and mini dlna server all running inside of it, all available anywhere on the net. Long story short FreeNAS can do pretty much anything you want it to.