All virtualization software that I have tried (MS Virtual PC 2004, MS Virtual Server 2005, Qemu/KQemu, VMWare) take whatever chunk of memory you give it and make it unavailable to your host system. That means if you have 256MB and you allocate 128MB of that to FC5, that leaves only 128MB for your XP Pro install.
I'm curious what kind of memory your system uses. I'm sure you could find something at Newegg pretty cheap. I bought a stick of PC3200 512MB a week ago for $30, and I know they had stuff even cheaper than that. If you had at least 512MB, I think you'd be ok running virtualization software.