WindowsXP SP2 uses the NX bit if it's available (A64, newer P4s, newer P-Ms) In fact, without that hardware support it's only partially effective since it would slow down the CPU too much.
WHat it does prevent is doing certain stack smashes where a malicious program pushes code on the stack and then executes it. Or writes code to a data segment and manipulates the stack to execute that code. While this makes exploits harder it is not a 100% protection against those attacks. If a program runs as administrator it can always overwrite parts of the code segment. And by default any Windows program is running under administrator priviledges.