>> So the culprit(s) is/are a new version of Tools and/or new vm hardware version. Regardless, it's a VMWare bug.

It's sort of the former (new version of Tools), but not really. You have found a VMware bug, though.

I just installed XP Pro in Fusion 13 on an Intel Mac mini 2014 with the defaults for virtual hardware version. I got the same issue as you when trying to install VMware Tools from the GUI menu. Looking at both the ISOs mounted in the guest and the contents of the vmware.log file,  Fusion 13 is mounting the wrong VMware Tools ISO file for a Windows XP guest when you request an install of VMware Tools. It is mounting the ISO file /Applications/VMware\ Fusion/Contents/Library/isoimages/x86_64/windows.iso. The tools in that file are version 12.1.5, and they don't support Windows XP. That's why you're getting the "program is not a valid win32 application" message.

The file /Applications/VMware\ Fusion/Contents/Library/isoimages/x86_64/winPreVIsta.iso should be mounted by Fusion when a Tools installation requests is made for a Windows XP guest. That ISO is still part of Fusion 13, and contains VMware Tools 10.0.12 - the last tools version supported for Windows XP. Those tools haven't changed for years. I think you'll find if you look at the logs that Fusion 12 is likely (correctly) mounting this ISO file for an XP VM. My guess is that this is a regression from Fusion 12 introduced due to the addition of support for Apple Silicon Macs.

In a perfect world, this issue should have been caught. Given that Windows XP is no longer getting any kind of support from Microsoft and its support is deprecated on ESXi, VMware probably didn't think to include that scenario in Fusion test coverage. 

This issue can be worked around by either downloading VMware Tools 10.0.12 from VMware's software download site (the ISO is in that download), or making a copy of the /Applications/VMware\ Fusion/Contents/Library/isoimages/x86_64/winPreVista.iso to the Desktop. Once you have the ISO file, re-configure the virtual CD/DVD drive to that file (you can't point the CD/DVD directly to the file in the Fusion application bundle, that's why you make a copy). When the guest recognizes the CD after the change, autostart will start setup.exe and install the tools.