From: DeskNow Knowledge Base

I have problems using webfolders with Windows XP and Explorer

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.


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)