I believe that you need to slipstream your copy of winxp with sp2
here is one site I found with instructions on how to do this
http://www.helpwithwindows.com/Windo...p2-bootcd.html
When you have the sp2 files integrated in the install the updated files that winxp needs to support the larger hd will be there. The other option would be to use something like partitionmagic to resize your partition after xp has been installed.