|Do you understand that XP is a 32-bit OS & it will only recognize 3.5GB (or less) of your 8GB RAM? There may also be driver issues.|
Are you 100% sure you slipstreamed the SATA drivers correctly & that the new XP disc you created is bootable? When you attempt to boot from the CD, do you see the "press any key" prompt? Is it possible that it's there but hidden behind a splash screen? Did you test the disc in another system to confirm it's bootable?
Have you considered disconnecting the Win7 HDD (to protect it in case something screws up), installing XP directly to the 2nd HDD, then installing a 3rd party boot manager such as GAG?