I use XP all the time as my development/test machine. It all works as documented. My advice is to read the installation guide carefully and pay particular attention to the web.config setup.
if you're getting problems with connections to the database, then its likely that your connection string in web.config is not correct. Here is what mine looks like (SQL 2005). Note that you will need to put the connection string in 2 places.
<connectionStrings>
<!-- Connection String for SQL Server 2000/2005 -->
<add name="SiteSqlServer" connectionString="Server=viewmobile;Database=TestDB;uid=TestUser;pwd=mypass;" providerName="System.Data.SqlClient" />
</connectionStrings>
<appSettings>
<!-- Connection String for SQL Server 2000/2005 - kept for backwards compatability - legacy modules -->
<add key="SiteSqlServer" value="Server=viewmobile;Database=TestDB;uid=TestUser;pwd=mypass;" />
from memory, you will probably need to set SQL server to use both "SQL Authentication & Windows Authentication". You'll find this in the "Server Properties" for SQL 2005.
There are many threads in these forums that talk about installation issues. If you have a specific error then post it here or better yet, search these forums & your bound to find something that will solve your problem.
Also, XP/IIS5.1 has a limitation of 1 website. For instructions on how to set up multiple web sites using XP then read
thisCheers