I’ve installed countless Windows Server 2003 VMs, and not had any issues. Pre-morning-coffee, it wasn’t immediately obvious why Windows XP would have any issues installing, especially as its listed as a supported VM type during the virtual hardware configuration steps.I found some very helpful instructions here:  http://vantoft.org/2009/01/05/esx-esxi-windows-xp-guest-install-reports-no-hard-disk-found/

Essentially, VMware ESX gives you a choice of Buslogic or LSI Logic SCSI adapters for Windows XP VMs. The Windows XP CD installer doesn’t have built-in support for these adapters, and therefore cannot see the VMs hard drive(s). As such, you need to download a floppy disk image containing the necessary SCSI adapter driver. Thankfully, VMware provides this floppy disk image for download. Follow the 6 steps in the above link to proceed with the Windows XP installation.