do I have to install WinXP on the native BC partition first? When you say "transfer as desired", do you mean drag the entire content of the VMDK (whatever in the C drive) to the native BC partition?
Follow the instructions in the Fusion setup guide regarding how to
install XP in bootcamp and letting Fusion use BC as a VM, in particular
the activation issues.
Once the XP BC is running as a VM, you can add the old VMDK as a second
hard drive in that VM, where the old disk will show up as D: or something.
Transfering data and documents is straigtforward. Transfering applications
never is, because there are executables, setup files, and Windows registry
entries. Usually the simplest thing to do is re-install the application, as you
would on a brand new system, and then point them at your existing documents.
One other possibility is using a mirroring/ghosting utility, like Acronis True
Image or Migrate Easy. Create a new second HD in the old VM, and use that
as the Acronis backup media. Then use that HD in the new BC VM to restore.
I am unsure how the BC VM setup will be affected if you do a full restore, so
if there's an option to migrate applications and data only, maybe you should
use that. You may need to experiment. I've never actually done this, so I
don't know for sure.
That's all the advice I can offer for now. Your problem is basically the same
as anyone moving onto a new system. Look for information on that.