You're seeing two seperate functions, which happen to overlap in one direction.
For XP Pro (and win2k), The restrictions (or allowances) that you see and change for local users are the NTFS filesystem's Access Control List permissions. These only apply to local user accounts and the NTFS ACL overrides any network permissions that might be set. So for example, let's say that user A is locally allowed access to folder 123, but not folder 456. Then you give user A access to the entire hard drive from the network (as a shared folder), user A will still not be able to use folder 456 within that hard drive. These Access Control Lists are also seen in XP Home when logged on as Adminstrator in Safe Mode.
When sharing a folder with Simple File Sharing, the local sharing ACL is set to allow the 'everybody' group. In this context, the 'everybody' group includes everyone that has a local user account on that machine. However, from the network all remote users are authenticated as members of the 'guest' group, regardless of any local user accounts.
[small](I've re-read this a couple of times before posting & I'm not sure if I've cleared it up, or made it more confusing)[/small]