Windows XP Mode can't see my LAN

I have a new Windows 7 Ultimate 64-bit PC and I've installed Windows XP Mode on it in a Windows Virtual PC. I can't get XP Mode to access the LAN. Outside XP Mode, Win 7 has access to the other Windows assets on the LAN.

My LAN is an all-workgroup network - no machines on domains. In XP Mode, all I can see in the workgroup is the XP Mode virtual machine.

If I let XP Mode obtain an IP address automatically, it uses a different subnet from mine. I use 192.168.0.0. It sets up 169.254.0.0 automatically.

Then, if I manually assign an IP address that is on my subnet and is unoccupied (192.168.0.5) and assign the connection to the same workgroup, it still does not see anything else in the workgroup. It only sees itself.

Internet: When I set up the LAN adapter's IP address manually, XP Mode can't see the web. When I let it set up automatically, it can. This doesn't really matter as I don't need Internet access from XP Mode, but it might give a clue as to what's wrong.

Any ideas, please?

Hi @Kari,

Thanks, that was very useful. Step 7 was key to getting everything working in my case.