Read through a few threads re folder permission problems on Windows XP - found a solution which might apply to others.
Pathway to script in config may not be correctly set.
Look at line 42 or thereabouts in httpd.conf for correct pathway, which needs installation folder location as part of pathway.
eg. I was assuming pathway was /xampp/htdocs/script/ but looking at httpd.conf I noticed that the installation folder had to also be quoted.
Used /XAMPP_LOCATION/xampp/htdocs/script/ and all worked OK.
Hope it helps others, cause XAMPP is great. Wish I had a Linux box on the network, though . . .