OK if you want to run Vista alongside XP I would recommend you do a couple of things first:
1) Back up your important data - if you dont have a burner this could be a long process
2) Create new partition to install Vista on - instructions
here
3) iirc in Vista setup you can choose a partition to install it - I haven't used the Windows emulation software so not sure how it works but I imagine when you select mount you should have a new drive (from your screenshot y:\) navigate to there and run setup.exe.
If your having trouble with this download
Daemon Tools this is much more user friendly.
Oh one other thing you say you dont have a DVD burner is this because you PC may be a bit old ? if so did you run the Vista compatability check
here?
If you do this and pass then guess what you might be able to run it but it could still be slow as we all know what M$ minimum requirements mean
oh and note the part about the Aero user experience (on an early release I couldn't even run that and I've got an Athlon 3200+, 1gig RAM and a 256meg Radion 6600 GT
- ok it was an earlier version but you get the idea)