The .vdi file can be expanded using the same vboxmanage command as here. To use the expanded diskspace in XP you can either create a new partition from within XP (using the Computer Management tool from Control Panel/Admin Tools), or you can expand the current partition size to fill the available space.
To expand an existing partition, you’ll need to boot the virtual machine with a ISO disk image containing some disk utils, something like GParted. Attach the ISO disk image to your virtual machine and boot it up. Use the GParted tool to resize the partition, then shutdown, remove the mounted ISO and reboot Windows. It will now see the expanded partition size.