To the same Partition as XP. You [b]Can Not[/b] have different Versions of Windows well at least it's not recommended on the same Partition and you certainly [b][Can Not[/b] have 2 or more different Versions of Windows in the Same Folder. While =it is technically possible to install different Versions of Windows to the Same Partition but into different Folders this is highly dangerous and is very likely to produce a Unstable system that fails a lot if it even runs at all with both OS's.
What I think happened here was when you installed 2003 you installed it over XP deleting XP along the way. Now when you attempt to Install XP again it is seeing a full HDD/Partition with no room for it to be installed and is falling over at this point.
You need to resize the HDD and create unused Space to install XP to or if you can fit another HDD to install XP to. You can use a Partition Utility to Resize the 2003 Partition or you can use a Wiping Utility like Boot & Nuke to wipe the HDD and start from scratch.
http://www.dban.org/
No matter what you need to create 2 Partitions of roughly the same size if you have a small HDD or set aside enough room to run the Server Application on and leave the rest for XP depending on what it is you are actually doing here.
When you have decided what it is you need to do install XP to the Primary Partition as I'm assuming that you will want to keep it on this computer and install 2003 to the Second Partition after installing XP.
if you resize the 2003 Partition and then install XP to the freeded up space when you delete 2003 you will most likely be unable to boot into XP again as the initial Files required to boot the system will have been wiped along with 2003 on the Primary HDD Partition.
Col