I had the same error while trying to install new winxp guest. 
Decided to go for new HDD and try on Debian, but first wanted to install WinXP 
on first primary partition. During installation of WinXP I got "STOP: c0000221 
Unknown Hard Error" again! This time without any virtualization or Linux 
involved

After swapping DVD-drives all went fine.
So I ripped new iso image of WinXP installation disc using new DVD-drive and 
tried again with WinXP on Ubuntu 11.04 - all went fine!

Don't know if it is purely hardware or hardware+kernel problem - it
works with new DVD-drive and I don't have time right now (wasted too
much on this issue already:/) to investigate.

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https://bugs.launchpad.net/bugs/445456

Title:
  kvm hangs booting windows XP Pro SP2 or later, since at least
  2.6.28-15

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