As noted, use nLite to "slipstream" your XP Install CD to SP1 or SP2 (I'd choose SP2). It's fast and easy to do this and it creates a new Install CD that will install XP SP2 on your computer.
Then, re-install XP using the new Install CD and choose whatever partition size you want.
Alternatively, you can update your already-installed XP to a later Service Pack, reboot, and then use GParted or another third-party disk manager to expand the System partition. But you still want to create a slipstreamed Install CD for future use.