Installing Windows XP into Boot Camp under Lion
You state in your question that you have partitioned your "internal HD using Disk Utility". 

Frankly, I do not see how this could possibly work since the hybrid MBR on your drive would not be properly configured if you partition your drive using Disk Utility. (This is just a guess, but possibly the BIOS emulation is also not correctly enabled?)

I suggest you use Disk Utility to remove the partition you created for Win XP and then restore your OS X partition to its full size. Then use Apple's Boot Camp Assistant (located in the Utilities folder) to create the Windows partition to install XP into. 

Using Boot Camp Assistant to create the partition will ensure the hybrid MBR is set up correctly. 



Another alternative you might want to consider if your usage of XP is going to be minimal (i.e. no graphics intensive gaming) and your Mac has enough memory (at least 4 GiB) and a processor which supports virtualization. You might want to try installing Windows XP into a virtual machine instead. 

I have had good luck using a Oracle's free, open source virtual machine VirtualBox.

The advantage of using a VM is that you don't have to reboot your Mac to use Windows. You just start the virtual machine which runs under OS X.