How does a freshly formatted drive have a System Reserved and Recovery partition? Do you mean you ran Factory Recovery and this is what resulted?
Is this a retail copy of XP and not OEM? Is the XP CD clean and unscratched? Are you full formatting the target XP partition first?
You may be running up against conflicting boot code that requires actually wiping the HD first of boot code using Diskpart Clean Command
. This is a destructive process so I would make my Acer Recovery Disks first, but I would not use them except as a backup. Instead I would install XP first to the wiped HD which you partition and full format, then after XP install do the superior Clean Reinstall - Factory OEM Windows 7
last so it configures a Dual Boot menu. The Windows 7 installer for your licensed version is provided in Step 1.
If you're in Windows 7 now, type Snipping Tool in Start search box to take a rectangular snip of your maximized Disk Mgmt drive map and listings. Attach using paper clip in Reply box.