network sharing and xp firewall issues

I know nothing about XP's firewall. Don't use it and have no desire to use it. Since you are using a router, you already have NAT protection. Does your router have a firewall? For no other reason than the convenience of controlling only one device, it seems that using a router firewall would be preferable to running one on each machine on the network ...

Your router's firewall (NAT Firewall) performs no firewall function between computers on your own LAN.  It protects them from WAN intrusion - the Internet side.

I've done a lot of reading on firewall's and hardly anyone recommends using the Windows XP firewall, especially if you have a NAT router between your broadband connection and your LAN.

I recommend you turn off the XP firewall; then go to http://www.grc.com/default.htm and run Shields Up on each PC on your LAN.  This utility will tell you everything about your exposure to internet threats.

Also, note that your router NAT function only protects you from inbound internet traffic, not outbound transmission of information (like personal information that could be sent by ad-ware, spyware, trojan, worms, etc.).  To protect your personal information from unintended outbound transmission, you will need a personal firewall, such as ZoneAlarm, Norton Internet Security, etc.

The XP firewall is about as safe as using the pull out method is ... disable it and run a good firewall, as mentioned in the above post.