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Windows 7 is definitely worth it - both in performance and stability.
Switching to it is indeed difficult - but there are third-party tools that help doing that. I used Zinstall XP7 when I had to...

Try running MS XP Mode checker found here

If it still fails, and you need your XP stuff enough to pay for it :), consider Zinstall - it runs on anything, and automatically moves all your XP stuff...

You need a high-end Windows edition and hardware VT.

Here's a Microsoft tool that will tell you if you can run XP Mode.

If you can't, you can always opt for Zinstall (like XP Mode, and also...

What is your purpose in installing XP on Windows 7?
Maybe you could go for installing XP Mode (if you have have high-end Windows and hardware).
Or you can use Zinstall to just move all your Windows...

Could it be that your XP CD is damaged? I don't know if there is a way to check it for consistency, but it behaves very strangely.

XP Mode only runs on Windows 7 Ultimate/Enterprise and requires hardware VT. Do you have these?

Also, there's a thread mentioning Zinstall:...

What do you mean #88 error? Do you get a Blue Screen?

You'd need to get a special hardware card with a TV tuner. I recommend using Leadtek WinFast cards. Google them to find where to buy...