Dave, thanks for the decyphering advice Re:stb, i must admit i usually refer to it as the "cable modem" but what's in a name?
I can't comment on xp, have only got win2k & 98 on my machines, however, is the client nic set to obtain an IP address automatically? If not this may be the conflict that is stopping the wizard.
ICS generally expects to set the host (your xp machine) up to 192.168.0.1 and then the client(s) up sequentially i.e 192.168.0.2 for your second machine. I've tried setting this up statically myself and ICS does not seem to like it!
If client nic address is dynamically assigned, check the actual assigned address using run: winipcfg. This will be one of probably two on the drop down list - PPP is usually your dial up adapter, but you want the one with the same name as the nic.
If the address starts 169.xx etc then this is a "local" only network where the client has not been told it is part of an ICS set up. To set this up correctly, you can refer to the relevant "How to" guide for detailed instructions, but in outline, this tells you to go to the TCP/IP settings for the nic and to click the settings tab, then to add a gateway "192.168.0.1" and restart.
Two closing thoughts:
I may be on a wild goose chase (it's late and i've had a couple of beers!).
I currently have a bee in my bonnet regarding firewalls, particularly ZoneAlarm. If you have a firewall installed close and uninstall it before sweating more blood!!
Good luck and good night;