I use Nero and have had no problems using/ writing/ deleting CD-RW discs with Windows XP. I didn't even bother with the inbuilt functionality after early trials suggested it was lousy.
As an aside, UDF CD-R/RW support in XP is woeful and if I want to read a UDF disk I have to resort to booting in NT4 or 98 and manually copying the files onto the hard disk for XP to see them.