Ok, I put in some more work. New situation:
I have given the System Reserved partition the letter B: on which I created a folder NST with a self-made boot.ini and downloaded the neccessary NTdetect and NTDLR to it. A copy of this folder is on the XP partition E:
Boot.ini looks like this:
[boot loader]
timeout=10
default=multi(0)disk(0)rdisk(0)partition(1)\WINDOWS
[operating systems]
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="Windows 7" /fastdetect
multi(0)disk(0)rdisk(0)partition(3)\WINDOWS="Windows XP Professional" /fastdetect
Still I get the same error message: invalid boot.ini file
Now I wonder, is the System Reserved partition, partition 1? I tried configuration 2 and 4 as well but gives the same error.
Important note is that XP still did not manage to fully install. Could this be the problem? I am hoping that installation will continue once it wouldn't give me the above error message anymore.
Another important note is that when I create a new entry in EasyBCD and let it auto-configure XP it points to B: which is good I think. Then when I restart EasyBCD it no longer shows drive B: but
Entry #2
Name: Microsoft Windows XP
BCD ID: {9a8c04ca-8fca-11df-8189-a8969df79945}
Device: \Device\HarddiskVolume1
Bootloader Path: \NST\ntldr
Is this strange?
Any help much much appreciated!