We were able to reproduce this problem with our newly created XP testing environment. You need to add one more exception to the firewall on the Execution machine(XP VM) in order to make it work.
1. Navigate to "Windows Firewall -> Exceptions -> Add Program".
2. Add the ArtOfTest.Runner.exe from the "C:\Program Files\Telerik\Test Studio 2011.1\Bin" folder.
3. Restart the Scheduling service
4. Restart the execution server
Also, please upgrade to our latest internal release on both machines. You can download it from your Telerik account(see screenshot). This new release includes fixes for some scheduling problems that might be related to your issue too.
Hope to here from you soon!
All the best,
the Telerik team