It's not specifically listed on the support list for Converter, only Windows XP Professional is. XPe does have the same binaries as XP Professional, so it should probably work OK but there might be some minor differences which are causing the error you are seeing. Did you install and run Converter directly on that PC?
What platforms can Converter be installed on?
VMware Converter 3 can be installed on the following platforms: Windows XP Professional, Windows 2003 Server, Windows 2000 Professional, Windows 2000 Server and Windows NT SP6+ (IE5 or higher required)