XP had severe deficiencies in networking (no WPA/WPA2 USB2 support).
There is also an issue where the firewall in the router can block this. Since both are connecting to the router, I don't expect this to be a distance issue.
We have a wireless network and both pc's are connected to it. We are both running Windows XP and I have tried to set up sharing but my wife still can't use it, the machines are only separated by a wall and about 4 feet.