I would guess you do not have the drivers for the USB controller. Hit Winkey + Pause to bring up the system window, then open device manager. Expand the Universal Serial Bus Controllers to see if anything looks strange.
If it appears you do not have drivers, try clicking on the computer icon at the top with the magnifying glass to start Windows searching. If that doesn't work, you might look for Win 7 chipset drivers from your manufacturer.
You need to start a thread in the Networking area to get your Win 7 and XP computers networked. It isn't that hard. You cannot put the XP computer on a Homegroup, but you can put in on a workgroup.