Assuming you mean Windows XP (not EP) the answer is:
1. You can install Windows XP, but it will only work satisfactory if you install the XP version of all needed drivers.
2. You need to erase the disk with DBAN or KILLDISK first.
3. You only lose what you can't restore from your backup or can't install from the original setup program or disk.

So that's "yes, you can".

Kees