I highly recommend a firewall for Windows XP, I have used Sygate for a long time, and have tried several others like zone alarm, comodo with some time behind the zone, little behind comodo. I pick sygate way above the others, you can also see a review at c-net.
Windows xp firewall sux hind-tit or it used to, maybe they have upgraded the firewall with the release of vista, and windows 7 I doubt it.... The firewall leaves you open to attack from malware, and every time you boot up all the programs you have installed will phone home or report any info, tracking etc they feel like with windows xp based firewall. Sure some users are computer literate enough to configure the programs that give the option..some give the option yet still report your use at boot up, connect to internet, and where you travel, pretty much every program you install on your computer has the phone home feature !!
I'm sure I will have the flames rolling down from on high, yet I have spent a considerable amount of time behind xp based systems, and as far as security goes they are lacking to say the least..yet leap and bound beyond the blue screen of death 98 based systems.
google firewall test or online firewall test, run the test see what you think.. hardware is nice, yet it is just that hardware which can't be upgraded unless with a firmware flash, a software firewall is the best free option, if your anal a software version with a hardware firewall.