Make sure you back up more than just your project data. Make sure you back up the libraries, etc., too. Use the sqz backup option, not a windows backup.
If you purchase UFT 3.0 somewhere, I would install it as an UPDATE to what you have now and all should work well. You might then want to download the 3.1 version from the internet, too. However, if you REALLY want to make good use of your data, users are suggesting that you migrate to TMG (The Master Genealogist - ) Everything transfers nicely (no gedcom needed).
As for problems with XP and UFT, you might gain some information from our site the XP_UFT link from: http://rug1.tripod.com/http://rug1.tripod.com/