Why is everything in "My Documents" marked read only?

Re-checking the "read only" box on My Documents is normal behavior for XP for some reason (it's not all-out checked, it's a grayed checked box, meaning something under there is read only, not everything). I'm sure it's likely not set and staying set on the files.

Not sure if upgrading to SP2 converts XP Home drives to NTFS, but it might. Or, it may have been NTFS already and got the perms screwed up on upgrade.

I'd open Explorer, go to C:\Documents and Settings\%username%\ (where %username% is the name of your user account), right click on the My Documents folder, and click Properties. Click the Security tab, and make sure the person's user account is listed there with at least modify permissions (probably should have "Full Control" though). If not listed, click the Add button and add your user account with Full Control permissions.

If it is listed, sometimes NTFS permissions can get messed up and re-applying them resolves problems. Click Advanced, and check the "Replace permission entries on all child objects with entries shown here that apply to child objects" box, and click OK.

Alternatively, you can follow the specific steps to take ownership of a file or folder from the Microsoft site directly (from their How To):

How to take ownership of a folder

Note: You must be logged on to the computer with an account that has administrative credentials. If you are running Microsoft Windows XP Home Edition, you must start the computer in safe mode, and then log on with an account that has Administrative rights to have access to the Security tab.

If you are using Windows XP Professional, you must disable Simple File Sharing. By default, Windows XP Professional uses Simple File sharing when it is not joined to a domain.

For additional information about how to do this, check out the article How to disable simplified sharing and set permissions on a shared folder in Windows XP.

To take ownership of a folder, follow these steps:

1. Right-click the folder that you want to take ownership of, and then click Properties.
2. Click the Security tab, and then click OK on the Security message (if one appears).
3. Click Advanced, and then click the Owner tab.
4. In the Name list, click your user name, or click Administrator if you are logged in as Administrator, or click the Administrators group. If you want to take ownership of the contents of that folder, select the Replace owner on subcontainers and objects check box.
5. Click OK, and then click Yes when you receive the following message: You do not have permission to read the contents of directory folder name. Do you want to replace the directory permissions with permissions granting you Full Control? All permissions will be replaced if you press Yes. Note folder name is the name of the folder that you want to take ownership of.
6. Click OK, and then reapply the permissions and security settings that you want for the folder and its contents.

How to take ownership of a file

To take ownership of a file, follow these steps:

1. Right-click the file that you want to take ownership of, and then click Properties.
2. Click the Security tab, and then click OK on the Security message (if one appears).
3. Click Advanced, and then click the Owner tab.
4. In the Name list, click Administrator, or click the Administrators group, and then click OK. The administrator or the Administrators group now owns the file. To change the permissions on the files and folders under this folder, go to step 5.
5. Click Add.
6. In the Enter the object names to select (examples) list, type the user or group account that you want to give access to the file. For example, type Administrator.
7. Click OK.
8. In the Group or user names list, click the account that you want, and then select the check boxes of the permissions that you want to assign that user.
9. When you are finished assigning permissions, click OK.

That should get you going!