Thanks to Zineb Maddi from Matrox Imaging for pointing out this problem and fix!
When accessing a Windows CE 4.2 File Server share from Windows XP SP2 (with all patches as of 5/20/2005) you see explorer 'hang' for roughly 3-5 minutes before displaying the file share's contents. Copying files to or from the share fails.
This problem was caused by an overly protective patch to a security problem. See information about KB885250 at http://support.microsoft.com/kb/885250/.
You can either uninstall the KB885250 hotfix or alternatively, Zineb reported that he got another fix KB895900 (details: http://support.microsoft.com/kb/895900/) which fixed the issue for him.