XP needs a set-up similar to a modem in order to make direct connection available. click here for a fairly straightforward explanation with screen shots.
The most important part, is NOT to let Windows find a modem. Make sure the box is ticked that says "Don't detect....." Then you can select the Direct Cable connection from the list.
If you use my supplied link, click on the bottom of each page to continue the operation, to set-up the protocols etc.
I suspect the reason you lost your Internet connection, is the system tried to auto detect a modem and got confused, OR, you inadvertently selected your "Direct Cable Connection" as the default modem.