You must not have Windows XP as current OS..it wont work in XP...I HAVE TESTED IN WINDOWS 7 manually..however you can make a windows xp bootable,pen drive also but working window cant be XP.Goodluck :

Copy windows to ur computer from dvd or extract from iso
Insert pen drive
Run cmd as administrator(type the below commands)
Diskpart
list disk
In windows 7 u will see pen drive as a disk select it taking hint from,its size like 4 gb 8gb
select disk 1
Clean
Create partition primary
List partition
(select ur newly made partition:)
Select partition 1
(it can be 1 ,2,3 etc..)
Active
Format fs=ntfs
Exit
Now in cmd go to directory where windows is copied
D:
Cd windows 7
Cd boot
Bootsect /nt60 f:
(here f: is pendrive directory)
After success...copy all data in windows folder to pen drive manually
Now its bootable restart nd press f8(repeatedly) or your boot key :f8 is standard -to boot select usb i.e. Your pen drive