I'd move the System boot files to Windows 7 partition which works better, but first you must convert it to a Primary partition so that it can be marked Active and receive it's own boot files, because Windows 7 was installed to a Logical partition which cannot be marked Active.
To do this, boot into free Partition Wizard
bootable CD, rightclick on C, select Modify>Convert to Primary, click OK, then Apply.
Once it completes and is now a Primary partition, rightclick on C to Modify>set to Active, OK. Then I'd delete the small empty partition to it's right so you can Resize Windows 7 into that space. Apply all steps.
Now click on the Disk # to highlight it, from Disk tab select Rebuild MBR, Apply. Reboot to see if Windows 7 will start. If not boot into System Recovery Options
on Windows 7 DVD or System Repair Disk
to run Startup Repair - Run 3 Separate Times
until Windows 7 starts on its own and is labeled System Active.
Now you can install EasyBCD 2.02 to Windows 7 to Add XP, Save and reboot to see if it will boot from new Dual Boot menu. If not you may need to run XP Repair Install
or reinstall XP.