You can certainly do that with English Windows XP free.
1. Control Panel > Regional and Language Options
2. Click Languages tab
3. Install Files for Asian Languages
4. After you have installed the languages, click Details on the Text Services and Input Languages
5. From there, you can set up different keyboards for input methods as you like. I use Chinese Traditional - Quick
6. Click the Key Settings for a hot key to switch your input methods
7. One important step - click Advanced tab
8. Select Chinese (Taiwan, HKSAR as you like) in the Language for Non-Unicode Program. So that you can read Chinese in Outlook and IE.
Hope this helps.