The bootloader has to be installed on Disk 0 (the first disk) because that is how booting works. The Windows bootloader will not boot Linux but the Linux bootloader(s) are all compatible with Windows XP and can pass execution to NTLDR. You need to configure GRUB to allow you the choice of Debian or your XP partition. I am surprised Debian did not do this for you; most installers are better than that.
Google for "configure GRUB to boot XP" and look at the GRUB configurations sections. It should just be a matter of editing the menu.lst file.
This may kick start you. Alternately, just reinstall Debian or a different distro and see if you maybe missed a stage.
I am not a GRUB wizard and it is hard to troubleshoot a computer you are not in front of. GRUB says it needs the /boot/grub/* files on the first partition of the first drive so this may be a problem.