I finally got this to work on my XP installation
Supplementary troubleshooting info
I was unable to create or attach to home network from my XP machine. Windows would say yes success every time i tried but in actuality it was not ok. The XP could not see anything on home network , not even itself!!
I tried searching for any services or software that could be causing conflict. Found a driver for a wireless network USB, but removing it did not fix NAS problem.
I tried deleting and reinstalling network card from hardware device menus.
I ensured that all machines including NAS used same logical name for home network namely "WORKGROUP".
The problems with home network might not be related, but they seemed very relevant and consitent with NAS server access problems.
My FIX: I gave up looking for quick fix and reinstalled XP from scratch and this worked.
Note that Installing newest version of DSM (3) on NAS server before the big XP-format gave nice access to web based filebrowser interface that allowed me to transfer files from old XP installation to NAS server.