if the machine has the same IP as another device on the network then XP would show the yellow balloon exclamation mark icon so i would imagine its not that.
DHCP if configured on the XP machine will cause havoc on the PC its running on if router also has DHCP enabled, but i doubt router would be affected it would just be the XP PC with no connection or limited connection.
do check that internet connection sharing is not configured just to rule that out aswell
is the XP PC updated to service pack 3? and completely updated for all other system updates? sounds drastic but have you considered trying a format and reinstall of the full XP OS?
if all else fails maybe there is an old linux distro that could do the job?
Edited by deleted (Tue 21-Jan-14 09:47:43)