xp mode does not work on every version of windows 7, its pro, ultimate, and enterprise only (
source, also the microsoft download page will tell you that your edition is not supported if you select something like home premium)
i recently played around with the vm image itself, and it is possible to get it working under other vm software (VMware/
VirtualBox for example) and other editions of windows (xp/vista/7) with some modifications. i didn't try to get it working with Virtual PC, but i assme there is a way to get it working on any computer that is capable of running Virtual PC.
VMware does not impose the hardware virtualization requirement, but it does suggest that having it will make things faster
go
here and download the "Windows XP Mode" file, you can use
7-Zip to unarchive the files from the exe, finding the vm image inside is somewhat complicated
you can use
VMware Converter to make the image compatible with the free
VMware Player, or
VMware Workstation (not free)
changing the vm's license to be compatible with your computer is somewhat of a gray area and i won't post how to do that here