Yes, you can re-partition a drive that has Windows XP on it. If your drive has one partition that covers the whole drive, you can break it into multiple partitions and install a second copy of Windows XP on one of the new partitions. In order to resize your single partition that contains your current copy of Windows XP, you'll need specialized software that allows you to do so.
Acronis makes software that you can use to do this (as one example, there are others). The bad news is that it isn't free. However, I believe they have a trial version of the software that you can try out that may work for you, providing you just need to repartition the drive once. If you intend to do this more than once, you may want to fork the dough and buy the software - it's actually pretty decent.
If you're looking for other options - I believe Partition Magic also allows you to repartition an existing Windows XP partition, but again, you have to buy the software. I've never used the PM stuff, so I can't say too much more about it.
If free is what you need, I'd recommend Knoppix. Knoppix is a version of Linux that boots entirely from your CD/DVD drive. You just put the Knoppix disk in, and turn on your PC and it boots into Linux (without harming your Windows installation). Once it has completely booted to the Linux desktop, you run an application called 'QTParted' from the System sub-menu and use that to resize your existing Windows XP partition.
I've personally used both the Acronis software, and Knoppix in different situations. Both worked fine. I'd recommend Acronis if you're a newbie and uncomfortable with doing all this - and I'd recommend Knoppix if you're a more intrepid soul and think you can handle Linux alright. Just understand that this is a game that doesn't allow do-overs. If you screw things up, you can very easily wind up with a wiped drive, so backup any critical information on CDs, DVDs, network shares, thumbdrives, or whatever before you try this.
My current PC has two copies of Win XP Pro installed on it, a 64-bit version of Vista, and SuSe Linux. I installed one of the copies of XP, and the copy of Vista on this machine by resizing my drive's partitions with my Knoppix disk.
Here's the link to Acronis' page:
http://www.acronis.com/homecomputing/products/migrateeasy/and here's the link to Knoppix's website:
http://www.knoppix.org/Hope ya find something here that helps ya out;
-Caz1
P.S. -Before you do ANY of the above, don't forget to defragment that hard drive as a first step. Makes life easier for whatever software you decide to attempt the re-partition with.