PWC101 - Thanks for the case sensitive tip.
I was able to execute the following command with no problem.(Log is as Admin Account)
sudo VBoxManage clonehd /home/edwardss/.VirtualBox/HardDisks/XPHardDisk1.vdi /home/edwardss/.VirtualBox/HardDisks/XPHardDisk2.vdi
It created the hard disk. I had to change the ownership with chown to my regular account (edwardss). At this point does not appear to have created the whole environment, just the hard drive. Even that is labeled <inaccessible> by VirtualBox.
The key is to use the (File Menu)Virtual Media Manager and 'Add' the newly cloned drive. This seems to make Virtual Box 'aware' of the drive. Then go though the normal creation steps and choose this as the drive to use for the virtual machine. It booted up for me. One will remain XP SP1 the other will get patched to SP2
I'm on Ubuntu 10.04 with VirtualBox 3.26