Dan Jones posted a blogpost here: http://blogs.msdn.com/b/dtjones/archive/2011/06/10/sql-server-code-name-denali-supported-oses-and-upgrade-paths.aspx showing what OS Denali can be installed on.

_1) The current support matrix for OSes is as follows:

Windows Vista SP2 or later

Windows Server 2008 SP2 or later

Windows Server 2008 R2 SP1 or later

Windows 7 SP1 or later

2) Denali will support upgrading from these SQL Server versions:

SQL Server 2005 SP4 or later

SQL Server 2008 SP2 or later

SQL Server 2008 R2 SP1 or later

As you can see there is no Windows XP on that list. I am fine with that for a couple of reasons

1) Denali is not out yet, it might be another year before it goes RTM, and even if it is released a good number of companies wait for service pack 1. By the time that happens a lot of those XP machines might be running Windows 7

2) Nothing prevents you from running a Windows 7 virtual instance on your XP box so that you can still do your work

3) There is always Query Analyzer, Query Analyzer should connect to Denali without a problem, it connects to 2008 R2 just fine

So what do you think, will this be a roadblock for you?