Unfortunately Microsoft Virtual PC does not support actual hard drives being used in virtual machines. Most virtualization software prefers to use virtual hard disks as well.

However, I do know that at least VMWare Workstation does support using an existing hard drive (and partitioning) to be used inside a virtual machine. Last I checked you do lose some properies of the drive, especially if it is sata and not IDE. This shouldn't be as big an issue with Win XP as it can be with linux setups. The bad news, Workstation isn't free. I don't know if their VMWare Player, which is free (? I think), does have this same capability or not.