It should and does work fine on IIS on XP as far as I know. It requires .NET 3.5 SP1. There are differences between IIS on Vista vs XP, but this site is running on Win 2003 where IIS is pretty much the same as on XP.
I cannot imagine how it can be something other than editing the wrong file. If you remove the SiteTitle and skiplinks from the layout.master that your site is using there is no code that will put it back.
Hope it helps,
Joe