It is not clear by C drive and D drive, whether you actually mean drive 0 and drive 1 or partition C and partition D? If you have multiple drives, then I recommend that each OS be installed on separate drives, while all other drives are disconnected during the installation, and reconnected afterward. This will eliminate the boot loader and selection would be via the F8 BBS Popup menu. You would select the drive, instead of the OS. From each OS's perspective, they would be the only OS installed. This can eliminate some issues that are known to develop in some instances, plus it insures that if one drive goes awry, that the other is still available...assuming there isn't a massive hardware failure.
If you are going to install on separate partitions of the same drive, ideally XP should be on the first partition, but it may work okay on the second. XP should automatically create a boot menu with W7 included, so selection should be easy.
If all goes well, then no problem, but as you know, computers are something like the plans of mice and men, and will often go astray, so I recommend making a backup of W7 before commencing the installation of XP.
EDIT: I need to correct myself...I should have said that XP should be installed prior to W7 in terms of time, not location, so this makes the backup of W7 even more important. Of course, this installation sequence is not a factor if installing on multiple drives.
