FWIW, I'd recommend keeping the "dual-boot" simple.  
IOW, I'd just install XP on a separate drive (not actually creating a dual-boot scenario).
Super easy with a trayless removable bay...
Far less chance of something going wrong...

That's another route I hadn't considered, using an external drive for XP. Speed isn't a big concern, as the new machine is much faster than the old one. Even with a USB drive it'll probably be faster for the kind of stuff I do, which is mostly RAM- and CPU-intensive.

Thanks for the input folks. I was planning on taking Jims route with a second drive anyhow. 
Dave I'm not sure how easy it is to boot from an external drive? I pretty sure a drive needs to be internal to install the OS ,,, but I'm certainly behind the times with this kinda stuff.. anyone? 
 
As I said this is my old DAW and might not ever get used for Sonar again. I'm keeping it alive as a back up. I have a few extra ( smaller)  monitors and tons of keyboards and mice kicking around.  I would hate to mess up the W7 drive as it took a few days to have everything working smoothly as you folks know all to well.
If something goes wrong with the new DAW ( I doubt it) I can be up and running in a few minutes , just swap over the interface.
My son built this one and it originally had dual boot with W7 & XP so I'm used to that menu popping up on boot up. At the time I had no use for XP on my DAW.  I have since re built with just W7 only so this was all about this boot sector warning from MS. Seems like it is easy to overcome. 
 
Anyhow, I'm just going to go ahead and use the second internal drive , no animals will be harmed in this action..
I looked into the virtual machine and I think I like the dual boot option better.  
 
 

I've downloaded VirtualBox and intend to install it on the new Windows 8.1 machine tomorrow. After a lot of googling it looks like it'll handle my needs. Will report back.

So I did the nasty deed and it works like a charm. 
I pulled the SATA conector to C drive, told the bios to boot from CD
Installed W XP SP 3 32 bit. 
Shut down,  re connected W7 C drive,  change bios back to boot from SATA 0
When W7 opened I installed and ran the EasyBCD utility and it allowed me to add "E" drive Windows XP to the boot loader. You can choose which OS is your default and the time out for choosing.  
So I can now boot into either system without issue. 
All drives are available on both. 
 
So there you go. It works, I see nothing wrong with dual boot. It only adds a few seconds to normal boot sequence, big deal. 
Notes: 
One thing I did learn- Gigabytes web site sucks for older Mobo's. Half the drivers, even though they were correct, didn't work. And the sites layout is real iffy on what the heck your getting.  I had better luck going to Realtech for my LAN driver' It was a good thing I could open W7 and see what was in there.  Only the chipset drivers seemed to run properly thank goodness.
My Video is a Nvida EN7600 GS Silent card,
For the Audio I put my old Card Deluxe ASIO PCI card back in. They were made for Radio and have good specs. 2 x 1/4 " balanced TRS input and output Plus SPDIF too. 
Not sure what windows updates will still be available, no biggy, not using it for on line anyhow. 

I'm pursuing Bill's suggestion. I've installed VirtualBox and installed XP in a VM. So far, it looks and feels just like XP and no issues encountered yet. I'm liking the VM approach if for no other reason than I don't have to actually reboot my computer every time I install some software, as was the norm in XP days.