Even if you had chosen the right Hard disk when you were running the Windows XP tool, it probably would still have messed everything up. Windows 7 uses a different boot manager to XP, and I'm not sure its possible to boot it using the XP one.
But fortunately, chances are you can fix this completely using the Windows 7 DVD. It also has tools for repairing the MBR, boot loader, etc, but it is done slightly differently to XP, so a lot of people don't know how.
Boot up the Windows 7 DVD, go to Repair Your Computer, and choose Command Prompt. Then, do the following steps:
1) run the comand "BootRec /fixmbr". This will replace the MBR with a Windows 7-compatible one (which is needed to boot 7).
2) then run "BootRec /FixBoot". This will rewrite the system's boot sector. This is needed because Windows XP uses Windows NT Loader to boot, whereas newer versions of Windows (Vista and 7) use the Windows Boot Manager.
3) Finally, run "BootRec /RebuildBCD", to rebuild the BCD store. This should detect both Windows 7 and XP, and add them to the list. (You can run "BootRec /ScanOS" afterwards, to check if XP is included in the list of bootable operating systems).
Once you've done that, reboot, and everything should be OK. Its solved a lot of problems I've had dual booting 7 and Linux.