VirtualBox host: Ubuntu vs. Windows XP

Just go ahead. You will be fine.

4gb ram, 500gb disk, Pent D 3.2 ghz

Pretty enough to run windows or any other os as Virtual Machine.

Any reason not to do ubuntu host with xp guest? I know the xp vbox will run slower as a guest but really how much slower?

Virtual Box is a good solution to have Windows available from Ubuntu in case you need it. As aneeshep already said, your system is more than sufficient to acchieve a fair performance. However a virtualized system of course is slower than a proper installation. Some 3D-Support is there but, depending also on your graphics card this may not be sufficient for a given application to run as purposed. This is especially true for gaming. Most Windows games won't run in a virtual machine. You need to test your applications on your individual system to find out if they perform well enough for you.

As a rule of thumb it may be wise to have the OS as your host where you spend most of the time in and have the guest for things you can't do with the host-OS. As there is not much you can't do with Windows (but also only few you can't do with Ubuntu!) you have to keep in mind that from perfomance and from security aspects you are far better off having Ubuntu as your primary OS than running on Windows XP.

For iTunes you need to know that even in the recent release of Virtual Box 4.0 burning audio CDs is not supported and fancy 3D-stuff like Coverflow may not work.

Once you have setup your system it is also a good idea to keep all of your data outside of the virtual disk to access them from both, host and guest using shared folders or by network acess.

Yes, you could run a Virtual Machine and assign about 1GB of memory for it. You can use shared folders or even samba for your music collection.