Start your PC with the setup CD in a drive, and hit a key when you see the following screen:
Screen One
Boot from your XP setup CD to gain access to the no-reformat reinstall option.
I found that many people were thinking regarding IIS 7.0 installation on XP. To answer this question I did few searches and found out that IIS 7.0 is only for Vista+ or Windows Server 2008+ .
Here is the source
So answer to above question is , IIS 7.0 can not be installed on XP 
If you want to use IIS 7.0 on XP then you can do it by downloading latest virtual server build which is available for free on the internet and then install vista on it.
Then install IIS on vista and enjoy IIS 7.0 but make sure your computer can run XP and VISTA, both at the same time.
