Honestly bootcamp worked for me flawlessly, is it a legit legal XP SP2 disc? it doesn’t seem to like bootleg…
+1 for virtual machine. But here is a good word of advice for the VM. Once you get XP up and running, install all of your standard applications and don’t forget to install vmware tools. Then once you have a solid baseline system, copy all of the files for the VM off to some kind of storage. This way, once the viruses run rampent on your XP VM, you can just erase the VM from your drive, and copy over the one you backed up. Very easy way to start over.
VMWare > dual boot
OR
If you are running XP pro on some other machine in your house, just download a Remote Desktop Client from the windows website and use that to access it. I love running windows 7 in full screen from my g4 ibook 
Got it all set. Aside from me learning how to do a few things on a Mac, my problems were minimal. Had to boot the OSX CD to repair the drive before I could partition it, then had to slipstream SP2 into my old XP disk. Once I had done that properly everything was fine. Bootcamp even specified XP SP2 but I read past that part without it registering. Nice touch having all the Windows drivers on the OSX disk. Little touches like that make me understand Apple’s following. But Apple people are still weird.
Dual booting fine now.