The music should be in itunes music, not the itunes library folder.
Of course the only music that will be in the itunes folder are the cd's you have ripped using itunes and any music that you have "bought" using the itunes shop.
All the music you have downloaded will be in the normal folders, being the place your fileshare program would have saved them to.
Also, make sure nothing has been hidden. You pointed out that the itunes folder still held oodles of data yet it is unaccessable. Well, XP's password is only for accessing windows, not for accessing any programs, files or data. (that is like having a lock on your front door and then having a padlock on the kitchen, bathroom, loo, kitchen cupboards, etc)