The Xeon cannot care one way or another because it has no onboard memory controller. It does have a 1333 FSB and the lowest memory multiplier you can set on the motherboard is 1:1 so it's the motherboard chipset that is requiring DDR2-667 for any 1333 FSB CPU.
If you could borrow a stick of faster RAM you could boot the Xeon and set the FSB at 1066. Then your DDR2-533 would work fine but the Xeon would run at 2133MHz.