Ok, I can see that XP Home is being used on your sons netbook and that XP Pro is used on your home PC, and likely on the work laptop as well.
I'd like you to check a setting in the local security policy:
Click Start -> Run: type secpol.msc and click OK
Expand Local Policies -> Security Options
In Security Options, look for the object: "Network access: Sharing and security model for local accounts"
Let me know if this is set to "Classic".
You are absolutely right, it is set to 'classic'.
I'd also like to know what happens when you type \\netbook from the homepc.
Go straight into my son's netbook showing his shared folder which I can access but I have always been able to access his shared folder from the home pc anyway.
The explanation I have so far is that your son is being prompted for credentials because the Guest account on his computer is disabled (by default) and you have Classic sharing set in your computers local sec policy (if it was set to "Guest only", he would receive and access denied message instead of a prompt to enter credentials).
As for why your son still receives the lack of permissions message after authenticating with your credentials, I'm not sure. If your son was to type \\homepc\c$ in the run prompt, then is prompted for credentials, enters your logon and password, is he able to traverse the entire c drive of the homepc? If he is, then there's no reason he would receive any permissions errors when accessing the homepc the other way.
No, he cannot access it. The same message comes up as with the shared folder when I type \\homepc\c$ in the run prompt.
You have a couple options:
1) You can try to enable the Guest account on the netbook. I've never really worked with XP Home, therefore I don't know many of the work arounds to do things that are otherwise simple in XP Pro, but I do know many things are done in safe mode on XP home. Try booting into safe mode and going to computer management and seeing if the Local Users and Accounts is present then. If it's not, you'll probably have to go into the Control Panel and go to the Users option in there.
Nothing showing in safe mode, so had to turn on the guest account from the Users option in control panel. Still not able to access shared folder on home pc though.
2) Authenticate Classically. This is the method I, as an IT professional, am use to in large enterprise networks.
To do this, ensure that Local SecPol object I mentioned earlier is set to Classic. Then go into Local Users and Groups and create a user account for each individual you wish to access your computer (you may either disable or leave enabled the Guest account; disabling it will require credentials for everyone wishing to access any shares, unless you use the Local SecPol to allow access to as share anonymously). You said you have an account for your son set up already; your son should also be able to enter his credentials instead of yours to gain access to your shares.
Bother, cannot access this due to the same problem that caused my system restore to disappear. Am working on getting this sorted, so should be able to try this soon. BTW, when I said I had an account for my son set up already, what I mean by this is that he has his own username set up on the home pc which he logs into when he wants to use it. Is this the same thing you mean, or do I need to create a new user for him in respect of his netbook? Didn't do anything to get the work laptop to connect. It was already using the router wirelessly, and just was then able to connect to the network too when I set it up.
To further set permissions on your shares, go to Shared Folders in Computer Management (it's the one above Local Users and Groups) and then view the Shares sub-object. There, you will be able to see all shared folders on your computer. If you double-click a share then click on the "Share Permissions" tab, you can add/remove users and assign access permissions to each user.
I have done this. The username in it already was 'everyone', but I added my son's name. One thing though, I think it has added his username on the home pc as it calls it "hompcname\his name", so I am thinking maybe it is giving him access when he is logged on through his username on the home pc, but probably not through his netbook. However, surely signing in to the network from the netbook with my home pc username and password would overcome this anyway?
I hope the above is of some use in your deliberations. I really appreciate your the time and trouble you are taking to help me and hope it won't cause you much more work.