To turn of the XP Firewall...
Start > Network Connections > Right Click the connection and click properties > Then click on the "Advanced" tab. Take the tick out of "protect my computer..."
"She thinks XP sets a resore point automatically before you install programs. Is this correct?" - YES at least my XP does.
"Can you refresh XP with the cd disc as you can with Win98se..." You can refresh XP by inserting the XP disc and choosing the REPAIR option. click here You have to set your computer to boot from the CD to do this.
You could try from within windows, go to Start > Run > Copy and Paste:
Click "ok" have the XP disc in the drive.
Also go to Start > Run Copy and paste:
Now have a look at the Application and system logs for ERRORS and APPLICATION HANGS. Click the log in the log there should be a link, click that link. It should take you to the MS website and hopefully a fix.