Mike:
Yes, you can definitely run DNN on XP, but it has to be Pro or Tablet versions, Home does not support IIS.
Go to the downloads section of this site and get the Install version of 4.4.1 (maybe 4.5 by the time you read this) and the Docs. In the docs you will find detailed installation instructions. If the Core Team releases the new version, 4.5, on the 19th as scheduled, then it is going to be easier for you as it has a new installation process that is really nice.
Anyway, you will need the following in your PC, in this order of installation:
1. IIS.
2. .Net 2.0 (for ASP.Net 2.0)
3. SQL Server 2005 Express Ed. (Free from MS, I recommend the package with the Advanced Services)
4. If you want to do development you can use Visual Web Developer, also free from MS.
Bear in mind that you do not need to compile DNN to get going and build a site, it is ready to run out of the box (or Zip file). You only need VWD if you intend to develop your own custom modules.
And by the way, welcome to the DNN community. Don't hesitate to post any questions you may have.
Edited to add a great resouce you may want to explore, it has a bunch of great tutorials on all aspects of DNN. It is here: http://www.adefwebserver.com/DotNetNukeHELP/
Carlos