I posted a message about this about a week or so ago. It seems SF have it working on their test machines. I sure couldn't get it to install either. Maybe it would work if it was already installed on a Win 2000 system, and then that upgraded to Win XP? What XP build are you running anyway? Mine is 262
I'm using 2624. I believe the only thing missing is the "DV Updater" part of DirectX 8. If we could bypass that part of the install OR find a valid update for XP it should work. All my other DX software works fine under XP, this seems like just an annoying quirk in the Vegas install routine...
One of the new features of XP is dynamic driver loading, which is in some ways a good thing. Try turning on a DV device (which causes the Windows DV driver to be active), and then installing Vegas.
In any case, we'll be posting an XP-certified Vegas update once we get closer to XP release- XP is far from frozen as of this writing and we expect more to change.