@Maurice Volaski is correct. Fusion (or Parallels for that matter) running on Apple Silicon does not virtualize any operating system that needs Intel/AMD 32-bit or 64-bit processors.
To run Windows XP on an Apple Silicon Mac, you'll need to run it under an Intel CPU emulator such as UTM, which is based on the open source QEMU software.. Since you'd be running under emulation and not on the native chip, you'll find that it'll run but the performance might be a bit slow, and you will be running with a virtualized graphics adapter (just in case you're thinking about running games on XP).