in amd 880g chipset specs it is written that it supports directx 10.1, does it mean that we cannot install directx 11?
I'm not so sure what you meant by installing DX11.
You can not install Dx11 on Xp - only vista SP2 supports DX11 installtion through update and windows 7 comes with DX11.
You can install windows 7 which have DX11 without any issue.