The inability to connect could be due to too weak a signal or having the wrong network security key.
As for XP, you can definitely install it in a dual-boot scenario. Here's a tutorial: Dual Boot Installation with Windows 7 and XP
Alternatively, if you want to run XP programs in Windows 7 (and have Windows 7 Professional, Enterprise, or Ultimate) you can download XP Mode for free: Download Windows XP Mode
Windows Outreach Team