No, its a hardware limitation of the revision of the IDE controller, they cap out at 128 (137gig) and you will have to buy a PCI IDE controller to remedy this, but at this point in time you might as well just buy a PCI SATA controller instead, or just get a new motherboard. It has nothing to do with the version of windows XP. XP (2002 release) can address up to 2 terrabytes per a partition. Windows xp uses NTFS 5 and so does win2000.
In theroy the NTFS file system can support up to 16 exabytes, but with parition table restraints it can only support 2 TB, which is far greater than 128gig.
The actual limit of 28bit IDE controller memory addressing is 137gig, and depending on how you view gigs (1000 mb versus 1024 mb) depends on if you see the drive as 128/137.
This limitiation does not effect external drives, because FW and USB can address more.