In your Windows 7 system you need to do the following changes:
Go to Network and Resource Sharing Center->Change advanced sharing settings:
Once there change the following settings under Home Group/Work:
- Enable network detection.
- Enable File and Printer sharing.
- Disable Public Folder.
- Enable File Sharing for devices with 40 or 56 bits cypher.
- Disable Sharing Access with password.
- Allow Windows to manage the connections in Home Group/Workgroup.
Finally ensure both Windows XP and Windows 7 systems have at least one folder shared in the network and that both machines are in the same Work group under their NIC settings