Absolutely. We do completely support IE under Windows XP, and never tried to state above that we don't. For each release version, we have an automated suite of tests that runs under IE6, IE7, and IE8 as well as other browsers. This is in addition to testing of multiple browsers on Windows 7 and Mac OSX. The only OS we do not currently (or plan to) run any tests on is Vista. We do not do any testing in a virtualized environment. Guaranteeing support for all virtualized environments would be impossible as it would exponentially increase our testing. We don't see any reason why virtualization would cause your issue though.
I've attached 2 shots below of your site with the proper login box coming up in IE6 and IE7. This is under Windows XP. Again, I didn't try to progress past this point, as it seems that this is farther than you are getting. As you can see, in the bottom left of the status bar, there is no Javascript Error icon. From our testing, there does not appear to be any issues with your site.
We did not test IE8 under Windows XP, but have tried it quite a bit under Windows7. If you would like a screenshot of IE8 in WinXP, we will gladly do that.
Above, we asked the following questions. Can you try to answer them (we also added more). These will help us to continue debugging your issue. Without them, we're at a standstill:
* Do you see the same Javascript error on this page or our demo site? We're using a completely unmodified version of JFBConnect 3.0.2, so it should be the same.
* Can you try a different template (preferrably rhuk_milkyway) to test with? Many templates have poor javascript which throw errors and can prevent Facebook Connect from functioning properly. I'm not seeing any of these errors, but again, your problem is unique.
* Do you have Javascript enabled in IE? This is under Tools->Internet Options->Advanced
* Could there be some other add-on, virus scanner, or other protection mechanism that could be preventing the Facebook Javascript library from loading?