What's happened is Vista has been installed as an upgrade to the XP (hence the name change to the original Windows folder). Unfortunately, this build has no working uninstaller so you can't "roll back" to the previous system. In addition, it has written it's own boot instructions to the boot sector (bootloader) which won't work with XP...we need to fix that first.
I'm thinking we can get the old operating system going again using Recovery Console to repair the boot sector (get rid of the bootloader), rename the original Windows folder, rename the Vista folder, and edit the boot.ini file to match the changes. Sounds fun, doesn't it? Then the Vista folder can simply be deleted.