There is Windows xp usb MTP driver issues with Nexus 7. I have adb working just fine on windows Xp pro and ubuntu, but can't get MTP to work. Windows Xp deteces "Found New Hardware" and device manager shows the errors message "No drivers are installed for this device."
How to fix the MTP issues on Windows XP/vista/7
* On your computer, make sure it has installed Windows Media Player 11 as MTP or microsoft MTP Porting Kit.
* Download Android USB Drivers from ASUS website and extract the files.
* In Device Manager, select Nexus 7 device and right click, choose "update driver" 》install from a list or specific location 》 Include this location in the search 》 browse button and select the extracted folder 》 Next, and start the installation.
Then enable USB debugging on the tablet and then it is recognized by Windows Explorer. Worked perfectly.