I guess I don't understand the "limitation" of XP in this regard...more likely one with your Motherboard's Bios.
I format all my drives with Fat32 partitions...including the one on this machine (WD5000KS 500GB with single 500GB partition).
This way I have a dual-boot system, with Dos as a backup in case anything goes wrong down the road.
It's saved me more than once when I got a virus, a case of malware, or had hardware problems.
First you'll need a Win98 Dos boot disk or CD.
Boot from the Dos disk and setup the partition with fdisk, then format the new partition with Dos and copy the Dos system files to make the new partition bootable (format c: /s).
After testing the new partition to make sure it boots properly, install WinXP into the Fat32 partition with no changes to the partition.
Works fine, even with newer SATA drives.
CptA