I have used VMWare on a system with far less resources than yours, and I could still run XP in a virtual machine on it. It wasn't very fast, though, mostly because the amount of RAM will be it's biggest limitation. XP runs okay with 512 MB RAM, which you can provide. However, if you want to use that VM for software development, you'd better add more memory to that system, if possible. Or be patient when you're going to compile stuff.
To be honest, your requirements don't depend on Windows XP, since XP can easily run on a system with only 128 to 256 MB RAM and a harddisk of 4 GB. XP won't eat most of your resources. It's the other tools that you're probably want to run on that VM system that will kill it. Visual Studio won't be happy on it. Neither are many other applications. (And it doesn't matter if they're commercial products or freeware, most modern versions are developed for more powerful systems.)