Firstly it is usually a good idea to forget about trying to use the wizard as it's a complete waste of time!
When using ICS to share the connection then in the PC sharing the connection it is necessary to have two Network Interface Cards (NICs), or a modem card and a NIC. On the connection being shared under Network Connections / LAN Connection / Advanced you need to tick the Internet Connection Sharing option. ICS defaults to assigning IP addres 192.168.0.1 to the shared NIC and acts as a DHCP server to hand out IP addresses to the NICs/PC on your LAN.
To sort out the general connection stuff on XP take a look at TCP/IP Trouble-shooting
If you stick to using ICS make sure you run a good software firewall on the PC sharing the connection (because there is no protection as would be offered by a hardware firewll (e.g. NAT-gateway/router).