According to the EULA, you need to stop using the qualifying OS when upgrading to Windows 7. That said, many are using the dual boot method you are considering, but then bailing out quickly which requires some major surgery if you want to save your Windows 7 installation and move it over onto the deleted XP space.
Consider plugging in a second HDD and installing Windows 7 there with XP drive unplugged. You can then plug the XP drive in and boot to it by using the BIOS shortcut key to make XP boot first. You can also access your files from either as a data drive.
And it is much easier to back out of XP later by just unplugging the drive, or converting it to a data drive.