Actually the process is more simple than you've described.So, here's my way of doing it.
1. Install Windows Vista.
2. Install XP on a different partition.
3. After installing XP, you'll see that you have only XP as boot OS.
4. Boot with your Vista DVD & perform the repair option presented by Vista installation.Vista will then write another boot entry.It just takes 10 secs for me.Reboot & you'll have both the Operating systems present as your boot options.Simple yeh ?
Thanks for posting the steps too.
