In each OS, you must turn off
system restore on every drive except
the OS and where its apps are (if different).
It follows that apps cannot
be on a shared partition, though the data they use can
You should end up, on both systems, with system restore only enabled on one (or 2) drives, and those drives should be different on each system.
There should not be any
drive which has system restore enabled from both OSs. If one restore folder can be seen by both systems, it will be corrupted by XP, and Win7 will have a broken chain to which its only response is "start again".
Check the above, set a W7 RP, boot XP, check that explorer can't open W7 files or see its apps, boot W7 again and check that the RP is still OK.