What version of XP are you running? I forget the details but I spent significant time last year, trying to get IIS or PWS up and running on a machine running XP Media Center and another running XP Home, both without any success. I ended up getting an older machine with XP Pro on it, and that works perfectly.
If you are using ASP.Net, one option you might have would be to get Visual Web Developer 2005 (Microsoft had a free version out there for a while) This came bundled with a Web Server which it used to test ASP.net files - I only found this out, after getting the XP Pro machine setup, so I haven't tested it out or anything. I think Vista may offer some additional options here as well, but I can't be sure.