Sorry, couldn't think of a better phrasing.
It's probably telling you login failure because you're not giving the right username or password. Actually, to be more accurate, it's likely because you're not specifying the domain of the credentials.
In XP, if you just gave login + pass, it assumed you were giving a login that applied to the machine being logged in to. In Vista/7/8, the assumption is that the credentials apply to the box logging in FROM, instead.
What does that mean?
You're assuming you're providing WINXP\User, with password "password". What the XP machine is seeing is WIN8\User, with password "password". The XP machine doesn't know that login and doesn't care to be helpful, thus the login fail.
Try specifying the machine name. Give it the Win XP VM's hostname, then slash username.
I've been here long enough that I think I can forgo a signature.