Migration of a messed up network

Can anyone out there give me some clues how to go about this? I have a LAN environment consisting of about 30 users. The LAN is a single NT PDC environment. The end-user OS’s consist of Win98, Win 2000 Pro and some Win XP Home & Professional. Everyone is able to “see” files residing on the PDC because there are literally no security permissions set. It’s open to everyone. Furthermore, there’s no telling what might be saved on their local drives, but for the most part the main files reside on the PDC itself.
How do I go about moving this environment to a structured Win 2000 environment?? The hard part is that some people log onto the NT domain while the others like the XP Home users don’t. Moving files to a new W2K server would inherently cause problems.