1. Windows XP mode can only work on Windows 7 Professional and Ultimate.
2.If you have one of the above 2, then uninstall whatever virtual PC you have installed and get back to the original state.
3.Go to
this site download Windows XP mode and Virtual PC from there and install them in that order.
You can now use Windows XP on the Virtual PC. Please go through all the documentation and familiarise yourself on its working. Good luck.