For what you want to accomplish I would do the following.
Disconnect all the drives except one to install an OS on.

Install an OS, boot the OS disk, make sure to delete any partitions, create a new partition, full format that partition and continue with the first OS install.
Install updates, drivers etc.

Disconnect first OS drive
Connect second OS drive and install using the same routine as the first install.

Now connect them both, choose the default boot order you want from the BIOS setup. Most modern board BIOS now support changing the boot drive without having to enter setup each time. Usually F8 key during POST screen. This would be the easiest way to dual boot, especialy if you think you may want to remove an OS later. Your other option is to install a boot manager now on one of the OS's.

Now connect the 500GB drives and everything should work like you were originaly trying to setup.
You may have to repartition and format the old XP drive from a boot CD to get rid if it's 'system' disk status.