The conflict is arising because you are trying to use internet connection sharing on both PCs. By default, XP tries to use 192.168.0.1 as the internal IP for the host ICS machine. Since you have two ICS host machines, this is causing a conflict on your network. What you need to do is change the ip address of the second machine (the one in your sons bedroom) to a different range. Unfortunately, I don't think Windows XP Allows you to do this. Have a look around and see if you can change one of the machines to 192.168.1.1 You may have to alter the subnet mask too; I'm not sure about this. I presume you are sharing the internet connection on the first PC with the second PC via the wireless link, then sharing the wireless link to the second pc with the xbox in a sort of chain.
With this change, the machines should cooperate on the network and you'll end up with something like:
Modem <> [PC1 (192.168.0.1)] <> [PC2 (192.168.1.1) <> [Xbox (192.168.1.2)].
Failing this, I think you may have to resort to buying an ADSL router.
I have had a similiar setup working in the past where my xbox was out of reach of a cable.
I wirelessly connected the a laptop to the router, then connected the xbox to the laptop and shared the connection on the laptop. This was reliant on the router being 192.168.1.1 because at the time I couldn't change the setting on the XP laptop. I'm not at an xp machine right now but I'll look into it asap and see if it's possible or not.