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When running the following from the command line in Windows XP (to another XP machine):

net use "\\IP\c$" MyPassword /user:TheUser

Is the password passed securely? If not, is there a secure way?

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No, that will be seen by any packet sniffing tool out there. However, Net Use "\ip\c$\" should attempt to authenticate you as the current logged in user. if that does not work, (or you manually specify a different user with /user:theUser) a password prompt should pop up. That should be secure. Just click "remember this password"

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Out of interest: How does Windows hide the password when it passes it from the password prompt? – Umber Ferrule Feb 23 '11 at 18:47
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it does not actually pass the password, but a 'hash' of the password. It can then compare the hash it received to the one that is stored for that user. (see en.wikipedia.org/wiki/Cryptographic_hash_function) for an explanation of hashes. – Brian Feb 23 '11 at 21:31
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