Patrick D,
If you wish to revert back to your previous operating system you will either have to boot from the Windows XP CD or boot from the recovery partition on your computer. It sounds as though you are attempting to run the Windows XP Setup from within Windows 7 when you actually need to boot from the cd and perform a clean install.
For future reference and for those planning a migration to Windows 7 it is always best to ensure your current hardware configuration will be compatible first.
Prior to migrating to Windows 7 it would be best to download and run the Windows 7 Upgrade Advisor.
The Windows 7 Upgrade Advisor will determine if your current computer configuration will be compatible with Windows 7, for further information as well as a link for download please go here:
http://www.microsoft.com/windows/windows-7/get/upgrade-advisor.aspx
Another resource to verify compatibility is available at the Microsoft Windows 7 Compatibility Center located at the following link:
http://www.microsoft.com/windows/compatibility/windows-7/en-us/default.aspx
Also, please note that when migrating from Windows XP to Windows 7 you will not have an "in place upgrade" option. You will however have the option to select "custom" install when prompted. The Windows 7 install process will then copy all of your data in "My Documents" over to a Windows.old folder within Windows 7 itself. All applications and documents stored in other locations will have to be reinstalled / transferred manually.
For more information on the Windows 7 Upgrade, please go here:
http://windows.microsoft.com/en-US/windows7/Installing-and-reinstalling-Windows-7
For additional assistance with the migration of Windows XP to Windows 7, please go here:
http://technet.microsoft.com/en-us/windows/ee150430.aspx
Jessica
Microsoft Windows Client Team