On my windows 7 PC I have the following enabled:
Turn on network discovery
Turn on file and printer sharing
Turn off Public folder sharing
Use 128-bit encryption
Turn on password protected sharing
On my windows XP boxes
Simple file sharing is turned off and shared folders are password protected.
I share a folder and then add my username to the permissions.
I use the same username and password on all my PCs so I never get prompted for a password to a folder. I have one folder shared on each PC. If I want to copy or move something from one PC to the other it goes into a shared folder.
I'm pretty sure there is a tutorial on how to do this on this site. I had a quick look but didn't see it. I just got up so I'm not up to full speed yet. I'll have another look once i get some coffee in me.
EDIT: Found it > File Sharing - Between XP and W7 (and vice versa)
=File Folder Settings Folder Settings