Dual-booting is perfectly possible, and not too difficult.
I'd suggest installing XP first: load the CD, and when it comes time to select the drive make sure to partition it as you'd like and place XP on the partion you'd prefer (I'd recommend placing it on the first partition, more on that later).
After XP is installed then go ahead and install Windows 7 into the second partition. It will likely find your XP installation on it's own and record the necessary information in the Boot.ini file.
After both are installed boot up your computer; Windows may or may not present you with it's plain-text bootloader which lets you choose which of the two installations to run. If it doesn't then it will boot (likely to Windows 7 if it was installed 2nd). Once logged in go to the Advanced System Settings > Advanced Tab; the top portion is related to Startup behavior and should let you choose which OS to default to and whether or not to display the menu at startup.
Note: In my experience installing Vista/7 on 2nd/3rd/4th.... partitions is a good idea because these versions of Windows will perform a little trickery and display their installation partition as "Drive C"; if XP is installed to a secondary partition then it will likely consider C: to be 7's installation partition and E\F\G or something like that to be XP's. Installing both with "C:" as their system partition is a whole lot easier to remmeber.