so that each of the XP machines connected and use a Windows Server 2003 machine in order to check the usernames/passwords for login
Well, I don't have any on-hand experience with 2003 but, I can give you what I know from my experiences with Win 2K Advanced Server.
I would think the best solution would be to create a domain on your 2003 Server. Setup your Active Directory (on 2003 Server) to establish valid users/passwords/privilages and then setup each XP machine to be a part of that domain. Maybe also disable/change passwords on the local machines so that the clients have no choice but to logon to the domain. (meaning they won't be able to use the Guest account or any other account that comes default on a local machine).
You may also have to tangle with the local security and user rights on each client machine (I'm pretty sure you can add the Active Directory members (on your server) to local machines and assign rights based on those groups).