Which version of XP...Home or Pro? Did you set up shares? Did you check firewall settings to be sure that the local network is excepted as well as file/print sharing? Any third party firewalls? What sort of error message are you getting when you try to connect?
I ran the network setup wizard on both computers, when i go to 'view workgroup computers' and click on the one i want to connect to i am asked for a password, i tried the admin password and the password for the user that ran the wizard -- neither worked ....

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