Thanks for replying spike2me. I haven't bothered to ping them as I assumed that they can communicate as they are able to see each other, just can't download file from within the shared folder.
I'm also confused as to the error message saying "not enough server storage space is available...", never seen (or heard of) this one before.
I should also clarify that the attached message
"error on XP machine" is actually from the XP machine, not the laptop. This makes me suspect that what ever the "storage space" message means, refers to a problem on the XP machine, not a communication issue between the two.
Clear as mud.