What version of XP are you using. I have not tried anything less than XP SP2.
512MB Ram and 10Gb image should be fine.
What is your Pre-installation setup?
It should not take more than a few minutes to format, and I always choose the "Quick Format - NTFS" seems to work fine for me.
FYI: Here is the setup I have working fine. After quite a few different installs:
http://forums.virtualbox.org/viewtopic. ... highlight=
You may need to try another test run install from fresh, perhaps there was a glitch of some sort?