Microsoft released updates for Windows 7 that remove the need to have a processor with virtualization support to run Windows XP Mode.
Install this update to remove the prerequisites required to run Windows Virtual PC and XP mode. The prerequisites include a processor which supports hardware assisted virtualization (HAV) which is also enabled in the BIOS. After you install this item, you may have to restart your computer.
You can download the updates here (32-bit) or here (64-bit).