I always have the latest version of everything, so I don't think it would be the problem, because it works on my pc. I have also tested it on windows xp, xp x64 and 7 x64.
The 'not a valid windows image' sounds like the dll is totally incompatible (the app expects an x86 dll and it finds an x64 one or viceversa), if you had a different version it would simply say "couldn't find the instruction whatever" or "unexpected whatever".
Which version of xp do you have? Remember that x64 has 2 "system32" folders (system32 and syswow64). Maybe you have an x86 dll or x64 dll where you shouldn't.
You could do what I said earlier: copy the dll where ff3usme is, this way, you'll make sure it will attempt to load the dll you want and not another one you have somewhere else and it's driving you crazy
Or you could try the other version of ff3usme (x64/x86).