the best way... u need to install XP first and then install Win7 on a different partition.
Another best way, use Windows XP in VMware player inside windows 7 and you can use both without doing anything with your partitions or master boot record.
As Jelson said, get a backup.
After you are done with backup, get a windows XP CD. boot your system with Windows CD and install windows XP on it. It will need a full format of your HDD. If you got just one partition, divide into two at-least. I normally go for 3 or 4 partitions.
Now install XP on C partition. After you are finished with XP, just install Windows 7 on any drive like D or E either by booting using your windows 7 DVD or by directly running the setup.exe from the DVD from inside Windows XP.
This is method one in the tutorial link I gave in my previous reply. Hope it doesnt bring you back to square one.
I haven't read the article provided by avi but i have dual booted xp and win 7. You can safely try it. In my case i have installed xp first and then win 7. I guess its the preferred method.