can you have a dual boot system with mce and xp on the same rig
Yes, you can. And the way you do it, is by setting up your system to network boot.
When you run it as a media director, you will have the option under the Power menue of the orbiter, to restart your system as your Windows XP machine. To switch back to booting as an MD, you select again restart as MD from any orbiter, and be done with it, i.e. you don't have to mess with your BIOS each time to change your booting. You will always netboot, but if you have told lmce that you want to restart as Windows XP, the boot will fall thru to the local harddrive.
iirc, there is even a utility available that allows you to select the bootmode from within Windows.