UPDATE: This isn't turning out to be as fool-proof as I thought. For some reason, when ehSched is set to use a different set of credentials it can't download guide data. Reverting to Network Service makes it work again.
I've setup network shares as watched folders in Recorded TV before; and while it's not difficult, it is somewhat tedious to make all of the changes necessary to get it working, especially with Windows Home Server.
Fortunately there's an easier way to make it work. NOTE: I did this with Vista, but there's no reason that I can think of that it wouldn't work with XP too. Also, I haven't noticed any drawbacks to doing this, but I haven't put a ton of effort into testing it so if something doesn't work don't blame me. You can always revert back to the "Network Service" account.
- Create a local account on your Media Center. To do this right click on "My Computer" and select "Manage". Expand the "Local Users and Groups", right click on "Users" and select "New User..."
- I named mine WHSUser, but it's not important what the name is. Enter a password (remember this you will need it again), uncheck "User must change password at next logon", check "Password never expires", then click OK.
- Add the user you just created to the administrators group. NOTE: this is just the easiest way to obtain the correct permission set; I didn't take the time to figure out what files the user needs to have rights too for this to work. Double click on the user's name to open the properties dialog, select the "Members Of" tab, click add, type in "administrators", click OK.
- Open up the services mmc (Start -> Administrative Tools -> Services). Find the "Windows Media Center Receiver Service" service and open the properties dialog. Select the "Log On" tab and change the credentials that the service runs under to the account you just created. Click "OK". You should get a dialog letting you know that the account has been granted log on a service rights, and another telling you to restart the service. Restart the service.
- Repeat step 4 with the "Windows Media Center Scheduler Service".
- Go to the machine that hosts the remote TV share, in my case the WHS box, and add an user account with the same username and password as created earlier. Also [un]check the same boxes as before.
- Open up regedt32, browse to HKLM\Software\Microsoft\Windows\CurrentVersion\Media Center\Service\Recording, and add the network path to the shared folder where your tv is stored to the "WatchedFolder" value.
- Reboot the Media Center just to be sure everything takes effect.
Alternatively, if you've already setup matching accounts on your remote box (you probably did this if using WHS) just use the main pc account instead of creating a new one as long as the password stays synced, and you're using an administrative account it will work. The goal is to give ehRecvr and ehSched an account that has real network credentials (the other work-arounds involve relaxing security on your remote machine to allow for null network credentials); as long as the local account has rights on the remote share this will work.