As Crowning states, you do NOT have to do a thing to add the proper entries to your boot.ini file for dual booting.  If you choose "custom install" and direct Win 7 to install to your new hard drive that's all you need to do.  When you boot up, you will have the option of which OS to boot into, using your up/down arrows you choose which OS and then hit Enter.  Once installed when you're booted into Win 7 it will be your C drive (your other OS will then be your "D" drive).  When booted into your previous OS, it will be your "C" drive and Win 7 will be whatever drive letter was assigned to your new hard drive.  I'm currently dual booting Win XP Pro 32 bit and Win 7 Utlimate 64 bit.  I have 11 partitions and Win 7 is installed on my "J" partition. 
Another option is to use (if your motherboard supports it), Microsoft's "virtual PC" where you can run Win XP from within Win 7:
http://www.microsoft.com/windows/virtual-pc/support/configure-bios.aspx

One tip, if like me you have a lot of partitions, to avoid the confusion caused by changed drive letters is to rename them to include the drive letter from your old OS, ie:  C Win Xp (D:), J Win 7 (C:), G Vue (H:), I Poser (J:), etc. 

Good luck