CF-31 with Win 7 dual-booting XP installation

I need some help.
Trying to setup my CF31-ACNAA1M with pre installed Win 7, whcih I used over the last year, with another partition with Win XP to get my old VDW07 back on track.
Available are:
Win 7 recovery disk (DFQM8604LA) MK1-7PM32
Win XP backup image (DFQM8603LA) MK1-XP3M

EasyBCD should be a good tool and this guide looks good:
Installing XP After Vista or 7 - EasyBCD - NeoSmart Technologies Wiki

1. creating a new empty NTFS partition
2. changing the boot routine within BIOS
3. booting from the Win XP DVD
after accepting the license agreement I'm prompting with:

Reinstalling: Windows XP Professional
1. Reinstalling Windows to the whole HDD to factory default
2. Make two partitions (operating system and data) and reinstall Windows to the operating system partition.
(all existing partitions on HDD will be lost)
3. Reinstalling Windows to the first partition
* If you are using windows 7 or Vista, you can only select No.1 or 2
* If you are using windows XP, you can select any option number.
0 Cancel

What should I choose? Nothing sounds like a good option for me.
I would like to keep all my Win 7 installations.
I made an Image of my Win 7 system with Acronis for safty reasons before.

What's the way I should go for?
Thanks

 

Are you using a Panasonic restore DVD? I have a CF-74 that came with Vista Biz and XP pro DVD's, I have mine set up for multi boots and the factory image disc will only work as the first OS install, I have tried cloning the XP install into another partition but was only successful at getting it to boot to the blue "Welcome" screen, then it hangs forever. Seems it has registry issues that I could not figure out. But I tried both options, If you select option #2 in your post, it should return a message that there was not enough space in that partition and exit the install.

But for me, I tried and was not successful. I have successfully set up five or six times a triple boot with Vista, XP, and Ubuntu, on My CF-74 and CF-72's.