JerryMungo
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Might not be causing issues, but you need loads more memory. 1GB is not enough - your running XP which takes up a few hundred MB and that will only leave very little left for the VM image.
IF your only going to use the machine for VM's (ie a spare machine) have a look at ESXi (free)
RAM isn't the problem, here. A VM won't use more than you tell it to, and Windows XP only needs 256MB to run well... (Although you won't be able to run anything too hectic on top of the OS with only 256MB.)
But I don't think a single-core CPU is really ideal for virtualisation.
IF your only going to use the machine for VM's (ie a spare machine) have a look at ESXi (free)
Seriously though, I don't see why Intel can't start marketing a very basic generic appliance server that fits into a 1U rack mount... basic specs and licensed with your choice of appliance software.
I'm using the latest VMWare Server (2.0.1) as it's free and works well (usually)
http://www.vmware.com/download/
What is the diffs between ESXi and Server?