do I need to retain the Windows (XP) folder, and are there any risks involved in retaining the XP OS on my drive in order to do so if I do not connect to the internet with it?
The issue only arises when you boot XP and connect it to the internet.
Preferably you should be looking to achieve both, since in its disconnected state XP will soon start to show signs of obsolescence (bugs etc.).
As mentioned above, if you effectively turn the XP drive into "just another" external/internal hard drive by killing off its ability to boot (e.g. removing C
Windows as you previously mentioned), then you can just adopt the security posture as you would any other filesystem under your Windows 7/8 machine.
I think the confusion from me (and it seems others here) was your mention of
"XP installed programmes "...... kill your ability to boot XP and you'll kill those programs too.
If on the other hand you're talking about "Run as XP" in 7/8 then just install them in 7/8 and use them there.