There are various tutorials (including in the PHP distributable) on how to install PHP on Windows XP for development. Few are this straightforward, and none (that I could easily find) use the ZIP file, allowing for you to easily upgrade and/or remove PHP cleanly from your system.
Make sure all of your settings are set by stopping and restarting IIS by running NET STOP iisadmin, then NET START w3svc.
To test, create a new IIS virtual directory and create a file index.php, edit it adding the following code:
<html> <head></head> <body> <?php phpinfo(); ?> </body> </html>
Save the file, then open your new IIS app. If all goes well, you'll be looking at a PHP screen enumerating all of your file settings.
If you want to remove PHP, just reverse the steps starting at #7 and go backwards. It's really that easy.
[Update: 10/7/08]
In a new virtual XP Pro install, I have had 401.3 errors on this install. I found this (rather draconian) "fix" to the 401.3 error I was receiving. YMMV, but it did seem that the install was having some strange ACL issues.
Disclaimer The opinions expressed herein are my own personal opinions and do not represent my employer's view in any way.