I have been looking into the same problem recently. Stock XP installations refuse to run my VS 2005 Beta 2 compiled applications. They only work with SP2.
Well, I'm not sure about VS 2003, but if you take a look inside your project configuration under VS 2005 Beta 2, you will find an option called "Manifest Tool", with a suboption that reads "Embed manifest", which defaults to "Yes". Turn it off and you should
get rid of the embedded SXS. You can also deactivate the manifest file generation from the Linker options.
I have not tested this yet, but I think it's what you need