To enable the guest account:
- Go to Start, then Control Panel, and then click User Accounts.
- Click Guest.
- Click Turn On the Guest Account.
Although, since the guest account is a bit special, it's much better to create a new user and give him the right permissions. See this tutorial:
About User Management and Security in Windows XP
A user's access level can be a Standard User (Power Users Group), a Restricted User (Users Group), or an Other Group (Administrators, Backup Operators, Guests, Power Users, Replicator, Users, or any previously created group).
Once a user is listed, you can then modify their properties. Specifically you can modify their User name, Full name, Description.
I also found this utility that I've never tried but that some people do recommend:
Windows XP Security Console.
Its freeware version is a bit limited and requires you to log on to the said user account, but it seems like a convenient tool to make security changes without hunting through various system programs and registry settings: