The documented method to use internet explorer is in fact wrong for windows XP (at least with SP2 and IE7).

There are two dav connectors in xp, and the default one (called mini-redirector) is so buggy it is basically useless. Also by default it does not support basic http auth, which is the method used by Exponential. You have to edit a reg key to allow it, see KB #841215.

The recommended way to create a dav connection making sure the other connector (aka 'web folders') is used, is to add the port number at the end of the server address, starting from 'my neighborhood' | add network resource.

Please note that it is also a good idea to update the web folders software package first. The latest version is found on MS KB #907306.

Useful resources:
http://www.greenbytes.de/tech/webdav/webdav-redirector-list.html
http://www.greenbytes.de/tech/webdav/webfolder-client-list.html
http://svnbook.red-bean.com/en/1.4/svn.webdav.clients.html
http://support.microsoft.com/kb/907306
http://support.microsoft.com/kb/841215