As far as I can see, XP does NOT have the %LocalAppData% Environment variable.
Instead, take a look in
Code:
%UserProfile%\Local Settings\Local Settings\Application Data\Kobo\Kobo Desktop Edition
Of course, if you are using another branded version of the Kobo (for instance Borders), replace Kobo by Borders.
Remember also, this applied to the ORIGINAL Kobo. Not sure if this has changed with the 1.7+ desktop and / or the WiFi Kobo