XP is old, and will soon be not even recognized by MS. Install requires possibly days of downloading security patches.
Lion does not load XP into BootCamp, but can load XP into a VM such as VM Fusion or Parallels or VirtualBox.
7 is new enough to be still supported for a few years. 7 installs with far fewer "security patches" than XP.
Lion will load 7.
And Windows 7 Pro has an XP mode.
Install where? In it's own partition using Boot Camp or in a Virtual Machine on top of OS X?
You can only install Win 7 in a Boot Camp partition.
You can install any version of Windows in a Virtual Machine software program. I suggest XP for installing into a Virtual Machine as it uses less resources and all current programs still run on it.