Hi joe,
To verify that Forms Authentication is disabled, follow the instructions below:
1. Run IIS.
2. Right-click Sitefinity3.x virtual folder and select Properties.
3. Click the ASP.NET tab.
4. Click Edit Configuration button to open ASP.NET Configuration Settings window.
5. Click the Authentication tab.
6. Check the selected value for the Authentication mode property. It must be Windows instead of Forms.
Have a look at the attached screenshot for more information.
Also, you said you are using winxp SP2, SQL Express 2005 and VS 2005. What about the .NET Framework? Please note that Sitefinity requires .NET version 2.0.
Do let us know if you still experience any problems.
All the best,
Pepi
the Telerik team