Hi there....
This situation sounds VERRYYY familiar to me....i just faced it a few days back when i tried getting rid of Vista.....
well u will be happy because the reason you are seeing a "HDD not detected" while trying to setup XP is because there is an option calle AHCI or ACHI ...something like that which is needed for Vista to operate enabled in the Bios.....Dissable that option....which in my case was named something like Robson in the bios....and you are good to go....Walla .....ur HDD is detected ...........