That's how Windows XP works, by default, when it's installed on an
NTFS disk partition.  It blocks access to the Program Files and
Windows folders and to individual users' folders within Documents and
Settings.

You can share subfolders within those folders, e.g. you can share
"C:\Program Files\Outlook Express" or "C:\Documents and
Settings\Username\Desktop" and access that folder from another
computer on the network.

If you had Windows XP Professional, you could disable simple file
sharing, which would remove those sharing restrictions.

Since you have Windows XP Home Edition, that option isn't available
The safest thing is to share individual subfolders, as mentioned
above, or to move files into the Shared Documents folder, which is
accessible over the network.

You can re-install the operating system on a FAT or FAT32 disk
partition -- those disk formats don't have any sharing restrictions.
However, that would lose the benefits of NTFS, which is more reliable
and efficient and can use larger disks.  You'd also need to re-install
all of your applications.

I've heard of two possible solutions for XP Home Edition on an NTFS
disk partition, but:

1. They're un-supported, un-documented, and un-tested by Microsoft.
2. There's no guarantee that they'll work.
3. They might cause data loss or corruption.  

I haven't tried them, and I don't know whether they're safe.  If you
want to try them, at your own risk:

1. Back up your important data first so that you can restore it in
case of problems.

2. Run System Restore to create a restore point that you can go back
to in case of problems.

Here they are:

1. Start Windows XP in "Safe Mode with Networking" (which temporarily
disables "Simple File Sharing"), share the desired folder(s), set the
permissions, and reboot normally, or:

2. Follow the procedure shown here:

http://www.dougknox.com/xp/tips/xp_home_sectab.htm