1. Is XP current on patches? It shouldn't make a difference, but it can.
2. Is the old Firefox completely removed? Nothing in Add/Remove Programs, no files on the drive, all references to Firefox removed from the registry?
3. Have you used an up-to-date anti-spyware program recently? There may be something installed that you don't know about that is conflicting with the new version. Spybot Search & Destroy or Ad-aware will clean most of them.
4. Did you remove your personal Mozilla folder in Documents and Settings\username\Application Data\Mozilla, or at least rename it? There may be a plug-in/add-on that worked fine with 1.x that absolutely chokes 2.0.x.