I've seen WinXP run with 128MB... it is NOT pretty...
In fact, I would say the system is almost totally worthless if you combine WinXP with 128MB of memory (even turning everythign off).
Bottom line, no way in hell I'd run XP with a 128mb machine... either get more memory or use a differant OS, but stay far away from WinXP if you only have 128mb.