momist, there's no need to do any complicated tweaking of router or firewall settings. Simply assign a suitable fixed IP address (and subnet) to the relevant network adapter in XP but leave the Default Gateway and DNS entries blank. It should take you all of two minutes. XP will then have access to your local network but will be unable to communicate with the outside world.
If you need more detailed instructions then post back and let me know whether XP is using a wireless or wired connection to your router.