I have exactly the same problem with the same setup (Laptop with XP SP3 and wireless adapter Intel wireless pro BG2290; iPhone 4).
Have you found a solution?
I have this same issue. I've found that my laptop would not connect to a hotspot at a B&B I recently visited (unknown hardware), nor to my iPhone 4S (AT&T) nor iPad (3rd Gen Verizon) personal hotspots, all with the same symptoms you describe above.
However, when I booted the same laptop with the same hardware into Linux (Ubuntu Precise), the card was able to connect. This result lends credibility to your suspicion that the problem is with the Intel driver for Windows.
The driver I'm using is dated 10-Aug-2007, version 220.127.116.11.
Go to windows device manager > network adapeters > advanced > wireless mode > pick value "g" mode and click ok