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Both can use bootcamp paritions since their 2nd versions.
I've used both Parallels and VMWare fusion. VM fusion for the win. Less of a memory hog, and does what it is suppose to. You will see a huge performance increase if you do your WinXP as a bootcamp partition vs a VMware virtual harddrive, and then let VMWare fusion access it.
Also I would recommending stripping down your WinXP install with nLite to remove the bloat from it and also using SP3 to avoid the 150+ patches.
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