Points to consider:
-T500 supports 2.5" SATA hard drives with a maximum height of 9.5mm.
-The largest capacity drive in 9.5mm is a 1TB, the 1.5TB and 2TB drives are 15mm and will not fit
-You do not have to pick a specific brand or part number with the T500
-Windows XP supports a maximum of 2TB, so no limitations there
-Hard drives made today are Advanced Format (AF) drives with a sector size of 4KB instead of 512bytes (http://en.wikipedia.org/wiki/Advanced_format
-The Windows XP boot+install disc will not be able to format or partition Advanced Format drives. Depending on the drive, you would need to take additional steps to make the drive compatible with Windows XP
-Windows XP will no longer receive security patches for any new vulnerabilities discovered after April of this year.
-There are about 50 different ways to set up a dual boot system, with endless guides available out on the internet with a search.
feel it would be worthwhile to install Windows 7 on that machine, particularly the 64bit edition with 8GB of DDR3 RAM, which would be plenty for you to run XP with VirtualPC or Virtualbox
-If you have no interest in Windows 7 and wish XP to be your primary OS, then why are you wanting to dual boot Windows 7 as a secondary OS?
-GParted or Parted Magic are excellent hard drive utilities for partitioning and formatting hard drives
-EasyBCD is an excellent tool for editing the bootloader
-Perhaps you should consider getting a hard drive ultrabay adapter and install Windows 7 on a secondary hard drive from a USB flash drive. That way you can hit F12 at bootup and choose the hard drive you want to boot to. That way you don't have to worry about bootloaders or separate partitions on the same drive.
That is everything I can think of at the moment. Good luck!