Add the following keys under on the XP machine:
HKCU\Software\Microsoft\Windows\CurrentVersion\Policies\System

HideLegacyLogonScripts = 0
HideLogonScripts = 0
RunLogonScriptsSync = 1
ALL are DWORD keys

The above worked for me but I know it may sound silly but check that when you get the logon screen on the XP machine that you have sellected your domain from the drop down list box as I have had other people that could not get it working because they was still loggin on to the local machine not the domain.

Hope this helps
Jay