New instructions with Confluence 3.2 upgrade:
To map a Confluence WebDAV client web folder in Windows XP use ' My Networdk Places' not 'My Computer'.
http://confluence.atlassian.com/display/DOC/Using+a+WebDAV+Client+to+Work+with+Pages
WebDav client setup instructions can be found here.
With the February 13, 2010 move to new hardware and an updated Confluence software install the WebDAV plugin is now functional. Use Confluence like a network drive with drag and drop file operations. WebDav client setup instructions can be found here.