The problem is with Microsoft and new Windows versions. For some reason Microsoft changed their clients for the XP versions without telling anyone what they changed. We've done lots of research to figure out why it won't accept the respones from the webdav server but we really don't know why.
We've also found that some XP versions works while others don't.
A search for 'webdav options xp' on google shows similar problems on other servers.
I've had mixed results with XP. At work, both the server and client are running on the same PC and webdav works great.
At home, it's the same situation but I can't get webdav to work. I add a network location pointing to http://webdav. As soon as I try to open the network location, it tries to find \\webdav on the network instead of going to http://webdav.
So that must be like Jan said: "On some versions it works, on others it doesn't".