Sometimes, Win 7 / Win XP connections can get finicky about not having passwords. Try assigning a password to the XP user account. Let's say the XP machine name is "Disney", user name is "Mickey", and password is "12345".
So in the backup logon settings:
User = Disney\Mickey
PW = 12345
Domain = leave blank
Or try:
User = Mickey
PW = 12345
Domain = Disney
