Version 1.7.7 provides PHP 5.3.8.
Version 1.8.3 provides PHP 5.5.11

The document root is usually located at C:\xampp\htdocs. I do not recommend to change this, but rather add an additional directory path with your development files to it. To do this, you need to set the apache config accordingly. To do this, modify file C:\xampp\apache\conf\httpd.conf as follows:

1. Below the <Directory “C:/xampp/htdocs”> directive, add a directory directive for your development files:

# bco, 2014-06-02
<Directory "D:/joomla/htdocs">
  Options Indexes FollowSymLinks Includes ExecCGI
  AllowOverride All
  Require all granted
</Directory>

2. Find the <IfModule alias_module> directive where the aliases are defined, and add the following alias for apache to find the path:

# bco, 2014-06-02
Alias /joomla "D:/joomla/htdocs/"

3. Make sure you add the following aliases for the localhost: localhost 127.0.0.1 ::1

Change settings in xampp\php\php.ini as follows:

error_reporting = E_ALL & ~E_NOTICE & ~E_STRICT
upload_max_filesize=20M
post_max_size=20M
max_execution_time=120
max_input_time=150
memory_limit=128M

To activate the debugger, find the section [XDEBUG] in php.ini, then enable the debugger dll and set the port to 8000 or whatever is set in eclipse.

After changing any apache or php settings, restart with the following command:

httpd.exe -k restart