I would re-run the New Virtual Machine wizard and follow these steps:
1. Press a key to boot from CD
2. Welcome to Setup: Enter to continue
3. Windows XP Licensing Agreement (EULA): Press F8 (I agree)
4. Default disk is 8 GB Unpartitioned space, press Enter to Install
5. New partition for XP created, now partition must be formatted, pick: Format the partition with NTFS file system (Quick) -- unless you like waiting.
6. Setup should begin copying files and bootstrap the rest of the process.