Enter network password??? Wtf?

I am increasingly frustrated with the netoworking in Windwos 7. I am using Windows 7 Ultimate on one machine (Primary Desktop) Windows 7 Premium on my main laptop and Windows xP SP3 on my older laptop.

It seems I managed to get all the computers to see each other, except the XP machine cannot see the W7 machines of course...(why not?) though I am still not sure how I did that much.

I am still amazed how a company can be so successful while providing no documentation to speak of or any support without a major charge. Even going online to look for solutions, really is a futile search.

So anyway, when I go to access either W7 machine from the other over the network, a dialog pops up entitled "Windows Security" that says "Enter Network Password"

Well, I never set one up. I have no idea what that is or where it is coming from. I have all the advanced sharing permissions set so that there is supposed to be no password.

I went on each machine and set all the drives to share with all users...etc., and this still comes up. I am really pissed honestly. I dont see why this has to be setup so difficult. I thought Windows 7 was supposed to be better and easier to use...well...its not.

Can someone help with this? I just want my router to be my security point, and the rest of my home network to be totally open. I want to simply be able to designeated shared drives and folders on the machine on which they reside...just like Windows XP did. Cant it be the simple?

If you plan on sharing entire drives accross your network you need to set the drives permission settings using the "sharing tab" but more importantly for sharing drives you need to go into the "Security tab" and allow the drive to be accessed by "Everyone". The picture below should help. From a security stand point you would be better off just sharing the entire User folder instead.

As for sharing with the XP machine, make sure the workgroup name is the same then run the XP network set up wizard and allow some folders to be shared. It's worked for me everytime. If it's XP pro then you should disable simple file sharing.

Right now I am not even worried about the XP machine. I can see that from the Win7 machines just fine and that is my old laptop. I just want to be able to grab files from it for now. I will deal with that later.

I dont understand why one cannot simply go into a drive sharing wizard that asks you who and how you want to share that drive. Really, how hard would that be to setup as a feature in an OS that tried to do everything else for you...but moving on...

First of all, on my Desktop-001 machine (win7 ultimate) I got the first two dialogs I see in your attached image. That was a big help. But I never did get the last one. It just started assigning permissions to everything on C file-by-file...which took a long time...and then what about new files? Are those automatically permissioned?

But this still didnt work. Then it gave me errors saying the files were being used by other programs; pagefile.sys and couple of others. It didnt seem to work as when I try to access this machine from my Win7 premium laptop SCOTTMORRIS-PC I can see the drives and such, but I get a totally different error saying that I do not have permission to access Desktop-001\c...when I just changed the permissions!! I am attaching screen caps as well...