On an XP system, many pop-ups come in through Windows Messaging and not IE.
Unless you need Windows Messenger for work, make sure it is fully disabled.
Among other places, instructions for disabling messenger are posted at www.onecomputerguy.com
As far as a local firewall, it is a good security measure. The one built in to XP is NOT a very good firewall.
With any software firewall, you need to configure the firewall to allow you to see and be seen by your network.
My favorite method for blocking pop-up adds is to use the Mozilla browser. www.mozilla.org
The built-in pop-up blockers in Mozilla is more effective than most of the 3rd party pop-up blocker utilities.
Another thought, if Cool Web Search is one of the pop-up sources, it has become very good at blocking most attempts to remove it.
Check out the information and links at this site:
http://www.merijn.org/
The site was down when I just checked on it. They did have a link to a utility that was able to remove Cool Web Search.
Chas