In Windows 7, if you go into the "Network and Sharing Center" and click the link at the left "Change advanced sharing settings", have you set:
? Turn on network discovery
? Turn on File and Printer sharing
? Turn on sharing so anyone with network access can read and write files in the public folders
? Enable file sharing for devices that use 40 or 56-bit encryption
? Turn off password protected sharing (at least until you get it working)
If you're not logged into both computers with the same Username/Password, I'd suggest you at least have an account set up in XP with a Username/Password that matches that of the Win7 PC.
In XP, if you don't already have it, download and install the link layer topology discovery responder
In Windows 7's Network (My Network Places), what happens if you type the path to the XP PC into the address bar, ether by IP address or Computer Name?