4) on the Z, under network in "settings",
- Create a service with the following settings
IP Address: 192.168.129.201
Netmask: 255.255.255.0
Gateway: 192.168.129.200 
On the Z, the gateway needs to be 192.168.129.1 (the IP address of the PC). I would suspect that is why you couldn't connect.
3) Still in XP, still in the settings box for the SL series network adapter,
- disable the "IEEE 802.1x authentication" on the authentication tab
- allow internet connection sharing on the advanced tab
I'm not a XP user so I am not positive about 3b (connection sharing). It _may_ be that you need to allow connection sharing on your Ethernet network interface rather than the Zaurus network interface.
Also, you need to make sure there is no firewall turned on on the Zaurus network.
If you have problems where the Zaurus is hanging you'll need give details. Also, if you still can't get connection you should give us diagnostic info. For Windows open a command prompt and run:
- ipconfig /all
- route -n
- ping 192.168.129.201
Edited: 11/15/2004 to correct the explanation of the gateway address on the Z.
Dave