The adequacy of the Windows XP firewall completely depends on the user in my opinion. If you are a sensible and cautious user and you don't use P2P or file-sharing programs and you regularly use quality antivirus and spyware, then I think the built-in firewall is fine. I personally used just the XP firewall in conjunction with effective anti-malware programs for 7 years and never had a single problem that could be definitively attributed to not having a third party firewall installed.
I now have WIndows 7, which as mentioned has a two way firewall, but I don't feel any more or less safe behind it. If you are a relatively novice user, then I do think that having a third party firewall can cause more problems than it solves.