However, I seem to recall that XP didn't like using ASIO software for its system sounds, so you might not be able to use the ASIO driver until you get some DAW software installed.

You said you've got Windows sounds, so is that with the Digi001, or built-in motherboard sounds? On my old XP DAW, I disabled the motherboard sound chip in the BIOS, so that it only used the M-Audio PCI audio card I had. Always a standard tweak to disable all the windows system sounds to avoid conflict and glitches when using your DAW.