I don't understand why Parallels would show XP as a guest unless you installed it also under Parallels.
A hint might be that when you installed Xandros you specified the boot loader to be installed in the 'installation partition'. It is painful to read questions like where to install the boot loader, but when in a virtualizer installing to the device boot sector is o.k. because it is not really your actual hard drive's boot sector - only the virtual disk's boot sector. If you installed the boot loder to the installation partition, Parallels will not see a boot loader on your virtual hard drive. You could try to rescue this by rebooting the CD and using the rescue option to run lilo, if you know a lot about Linux, but your best bet is to just re-install and allow the boot loader to go to the disk's boot sector. Xandros 3 is trickey for some other reasons. There is a lot of info on the Xandros site about using Parallels with it.