Actually, you can use Fast User Switching under XP SP2 while connected to a domain. I'm doing it. When I first tried, I was unable to, as I had not been usint FUS prior to installing SP2. However, circumstances arose where I had to reinstall XP and SP2... so I enabled a second account prior to installing SP2. After installing SP2, I was still able to switch between the accounts. I've even completely deleted the original 2nd account and added another just ot be sure. Works fine. So the theory of being connected to a domain is not correct.
One thing I know that is enabling this is that the Fast User Switching Compatibility service is set to "Started" and "Automatic". Perhaps this makes a difference.
Take Care,
DonnaA2Z