If it's a web application and "runs perfect" on XP, my assumption would be that you mean it works when you view it from a browser in XP - I'd assume that you're hosting it on a different machine. That being the case, there are a huge potential list of concerns...
- you could be using a custom web control (say, an ActiveX control) that works in earlier IE but doesn't run under IE8's stricter security
- you could have a markup/standards compatibility problem
- you could have something installed on the XP machine (an IE plugin) that's not on the win7 machine (or doesn't work under IE8)
It's important to identify what the real culprit is. I would guess that it's the differing browsers, not the differing OS - is your WinXP machine running IE7 (or even 6)? Does it still work in XP if you upgrade to IE8? Does it work in a non-IE browser (Firefox, Opera, Chrome) on either OS?
Ultimately there's not enough to go on in your question to solve the problem, but there are plenty of avenues to investigate.