From: DeskNow Knowledge Base
http://www.desknow.com/kb/

I have problems using webfolders with Windows XP and Explorer
http://www.desknow.com/kb/idx/12/178/article/

Some Windows XP updates have introduced a new WebDAV client that often has problems in normal operations, and integrating with opening file with double-click, and so on.

Solution

You should consider a professional webdav client for Windows, like WebDrive or NetDrive.

Alternatively, you can try and install a patch from Microsoft:

Software Update for Web Folders (KB907306)