Yep, everything's working as it should for me. Using Win XP, File_Girl71's version of LPE & iTunes 10.5.2.11

I have local network sharing enabled & copy files to media library checked within iTunes preferences.

I guess you could try either deleting LW's prefrences folder (instructions found within the sticky here): If LW 5 Will Not Connect or reinstalling LPE.
Other than that, I really don't know