You do not need squid
to do this. I assume your Linux box is the one that is connected both to the Internet and to your local net (the 192.168.0.x net). You can use a facility called iptables
to do this, and at the same time, you can set up firewall rules to protect the whole net (somewhat) from intrusions. I have written one of a large number of tutorials on this topic, available here
Once you get that firewall set up to filter and to do Network Address Translation, then all you need to do to your XP machines is to make sure that they are configured so that the Default Gateway address is your Linux box 192.168.0.x address.