The definitive answer is "it depends." It depends mostly on what you're trying to block, and where best to block that material.
Generally it helps to block unwanted traffic from gaining access to the LAN, so by all means enable your router's firewall. (I'm assuming you're talking about a real firewall, and not Network Address Translation (NAT), which is often called a firewall, but isn't.)
You also get benefit from enabling XP's firewall (or ZoneAlarm, or Norton, etc.) at the same time. By reviewing the reports and logs from these products, you find out what got through the router's firewall, and can take steps to strengthen your protection.
You have two options with any firewall: block everything, or block only what some reliable reference tells you to block. Blocking everything will stop your Internet connection dead, so you'll have to start judiciously opening ports and protocols (Port 80 and HTTP are needed for any surfing) to get back online.
The only problem with the second option is finding a really reliable source for what you should block. The router's manufacturer is usually a good place to start, assuming they offer any suggestions. The CERT at Carniege-Mellon University is a very good and very reliable source, but their reports are also very detailed and very technical, so they aren't a resource for the faint of heart or limited of experience.
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