In XP open system properties (I ususally right-click My Computer', click the advanced tab and you'll find the place to edit the PATH environment variable. Throw 'environment variable' at the xp help and support if you need more details.
Didn't see any posts about making this PHP - MS SQL 2005 work and believe it is useful information.
php has mssql functions, or you can use odbc functions to connect to your sql 2005 db. Assuming, of course, your sql server is properly configured and any necessary firewalls have opened the mssql tcp port.