Defcon 1
No point in software security. Anyone who is going to 'steal' it, is not going to bother with finding out if the data is protected. You are not Boeing and you are not living in France. They want to laptop, not what is on it. It can't phone home if it is waxed or booted using another OS.
The Defcon is not the best in the world, but it is an inexpensive start. Any other Kensington lock solution and cable is probably as good. The Defcon will sound if the cable is cut (but can be muffled and beaten into submission) and it can be set with the movement sensory on. It also works as a door alarm. Just set it behind a door on the floor with the sensory on. If the door is opened, it will bump it. Good for folks who worry about sleeping through someone breaking into their hotel room. Just do not hang it on the door as it will go off on false positives from other doors slamming.
Rule 1 of security - without physical security, you have none. Anyone with access to the computer, owns it.
Adding - you can use encryption in Windows XP. BUT - make sure you make copies of your key! Store one in a safe place, and store another in a safer place somewhere else. You lose the key, there is no way of recovering it.