To add to Robbie's good advice:
You would achieve a better result with MS VPC 2007 if you install Vista as your host OS with XP in the guest virtual machine.
This requires Vista Business or better.
We would be able to give you more specific advice if you post your specs: RAM, graphics memory, processor speed particularly.
If you wish to use Vista Home Premium, you can use VMWare Server (also free) instead of VPC. Many argue that VMWare Server is better than VPC. It's certainly more Linux friendly.
If you'd rather dual boot here's a good guide.
How to dual-boot Vista with XP - step-by-step guide with screenshots | APC Magazine
Dual booting gives maximum performance on either OS, but obviously doesn't have the immediate switching capability of virtual machines.
Here is XP running as a VM in a Vista host on my desktop.
Using Virtual PC
I now have XP running satisfactorily at 1280 x 800 with 512MB RAM allotted from 2GB.
Bear in mind when making your decision that the VM is using part of the system RAM for graphics. This means that unless you have MORE than 2GB of RAM, running Vista as the guest VM is not going to be a satisfactory experience.
Another matter which may be relevant. Apart from mouse and keyboard, VPC will not support USB devices. If someone can give evidence to the contrary I'd be very pleased.
VMWare will support USB, but I haven't yet managed to figure out how.
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