You do not select the drive for a XP entry. You will use the boot drive and that is what EasyBCD selects. This is not a bug or a error. It is all explain in the documentation.
EasyBCD Documentation Home - NeoSmart Technologies Wiki
If you wish to add a XP entry jsut do what you did. From there follow the steps outlined here:
Windows XP - NeoSmart Technologies Wiki
To get it working correctly. You will move the boot.ini file, NTLDR and NTDETECT files to the boot drive and the Vista boot loader controlled by EasyBCD will do the rest.