ok, sorry I didn't read this earlier. I first answer the easy part
There are 2 ways to change Group Policy settings in XP pro (in home SOOL)
you can type gpedit.msc at the run diag box, or you can type mmc, then from the console go to File Add/Remove Snap in, and add Local Computer Policy (appears as Group Policy). I also recomend the Resultant Set of Policy to whoever tries to use policies.
Just, make a restore point before, and do a backup of your current policies, because you can completely look yourself out of the computer. I have set restrictions to my brothers in their's PC, with logon hours even.
Get familiar with the interface, and you can even later check secpol.msc, which is only the section in Computer Configuration>Windows Settings>Security Settings. You can load templates in there. Remember changes apply to the whole PC.
I know there is a way to aply by users, but I have to check for that link if you are interested.