First guess, it might be IE's proxy defaults (despite you saying security settings it's worth a try).
Go to Start menu, control panel and open the item named 'Internet options'.
At the top click 'Connections' then 'LAN settings' at the bottom. Make sure that 'Automatically detect settings' is not checked, then click ok until it's all closed then try again.
Did the install come with a service pack? (e.g. XP SP2) if you're not sure, hold the 'Windows' button on your keyboard and push 'break' (top right of keyboard, near printscreen and scroll lock) then it's listed in the first paragraph.
rob