OP:
Keep in mind that you will be running a "Virtualized" version of XP within your already virtualized Win7 (through Parallels/Fusion). I can't imagine the performance hits this would entail.
XP Mode is great IF you don't have a licensed WinXP disc lying around that you can use to create another VM (through Parallels/Fusion) - you'll be able to download a fully "licensed" version of WinXP once you install XP Mode (it will only work in the Win7 XP Mode virtual environment, so it can't be used for Boot Camp or other VMs).
Depending on the requirements of your program, it may run a lot better in a separate VM. However, there should be nothing stopping you from trying the WinXP mode that you can get with Win7.
FWIW, I run 64-bit Win7 Pro with 4 Gb RAM and use VirtualBox for WinXP. This way, I can move/copy/backup the virtual disk to use on a Linux box (or Mac OSX) without having to reinstall all my stuff (which, combined with the required Updates - even to WinXP SP3 - takes most of the day), which you WOULD have to do if you ever wanted to try another virtualization solution, should you go with the WinXP Mode in Win7.
Good luck!