XP networking problem - "could not open http://......"

I have 1 PC and 2 laptops networked at home using a wireless network. All are
running XP SP2.
My files are all stored on PC and Laptop 1 can see and share these files ok.
Laptop 2 can see shared c:drive but when opening files , always get the error
"Could not open http://(PCname)/c/(filename)" and then the file opens in the
application. When trying to save back to the PC , i can't.
I can create new files on the PC c drive from my laptop, and I can open and
save non Microsoft files e.g Adobe.
I thought it might be my security settings so I temporarily turned these all
off - no joy.
I get the same error if I browse to the file in Windows explorer and use the
"open with" command as I do if I open directly in the application.
Is there a setting which needs to be changed ?