Terminal Servers and many of these multi-user applications do not support all applications.
You cannot copy to another partition and run that as a second OS, it won't work.
You can install something like VMWare Virtual Workstation, VMWare server, or Virtual PC 2007, and then create multiple virtual XP machines, each of which can be access remotely using remote desktop. This is a common solution when an application, such as a DOS app, will not run in terminal services. Keep in mind this requires an XP license for each virtual machine so it is by no means a free solution. You also need to have a machine that has lots of CPU power and RAM.