After lots of fiddling around with different "Storage Settings" on the WL-HDD I now have it working perfectly sharing the USB drive between the PC and the Mac.
The Mac didn't work until I restarted it - if you think a solution should work it may be worth restarting it then trying it again - it made a difference for me.
The successful settings for me were:
Network Neighbourhood Mode: Share all Partitions in Disk
Work Group: WORKGROUP
FTP Mode: Login to first partition
USB Device Mode: Sharing USB Disk
No nodes added to the Shared Nodes List (remember you've set "Share all partitions in Disk" above)
I then created two users in the user list. One which is the same username and password as my WindowsXP user account, and one with a simple username and password for the Mac (for argument's sake let's call it "nicholas").
On the Mac, after restarting first, (because I'd changed the settings on the WL-HDD but had made a few failed attempts to connect on the Mac) I access the share using the Go menu and select "Connect to Server..."
I then used the Server Address: smb://nicholas@DeviceName/usbpart1
(Where DeviceName is whatever you've set as the Device Name in "Storage Settings" and usbpart1 is the name that the WL-HDD automatically assigns to the USB harddrive attached (it always seems to be usbpart1).
I then got a login screen and was able to get into the share perfectly.
Hope this helps anyone else.