Lock XP to allow only one application

Have you looked into using group policy to restrict the system?

Thanks for the reply.
Let me explain more our needs.
We are using a VMWare instance on  a laptop that contains the application and an SQL DB. What I would like is an icon that the user click and this starts VMWare player launching XP who lauch the application at logon.
The users would see that as just another application. I don't want them to be confused with a Windows within a Windows. Since this application is for beginners and the users are on the road with their laptops, it would be a helpdesk nightmare to guide them if they can access Windows in the VMWare environment.
I've tried SteadyState and it does a great job but, it can load the application at startup, just the browser.

If the goal is minimizing confusion,  running XP inside VMWare player would do a relatively poor job.  You can't easily get rid of the boot screen, or the logon splash.  You'll also have to keep the program window maximized at all time.  But other than that, all the suggestions still hold.  Use GP to limit the visual interface as much as possible, and build shutdown procedure into the program.

We are in a controled environment, I can't install a SQL or a custom application on those laptops. The only thing permitted is a VMWare instance where I can do anything I want, thats why I'm using this.
Also I need to do a precise installation guide for my admins and I don't want to play around with policies, I would like something easyer to manage like SteadyState.
I surely can manage the shutdown in the program, but my problem is the startup. How can I start the application at startup and limit XP only to that application?
The user can still do a ctrl-esc or press the "window" key on the keyboard to open something else.

Exactly.  You'll need a way to restrict any shell access, like Window key and Ctrl-Esc.  GP is the only surefire way for that.  Precise guideline for admin isn't a problem.  Once a Virtual Appliance is configured, there's nothing a desktop admin needs to do.  You just have to  open VMWare Player and run the Virtual Appliance.

There're software out there that can wrap up the GP work nicely for you, but it's still changing the same things GP would change.  For example, http://www.emailarms.com/products/internet_kiosk.html.  

How can I apply group policies to only one user?
I don't want the Administrator account to be afected by those.
The VMWare instance is not on the domain, so I can't use GPMC and I think it's not possible to apply GP to only one user on a standalone XP.

You cannot apply a group policy to a single user on a stanalone workstation. It is to the whole computer which affects admins aswell.

You only option would be to use something like this

http://www.microsoft.com/windows/products/winfamily/sharedaccess/default.mspx

dirtysnipe, the link goes to SteadyState, as I  mention in this thread, I use it already.
With steadyState and by replacing the shell in the registry by my own VB.NET program, I'm able to achieve what I want. The only thing now is to activate the XP autologon.
I've tried to do this using instructions from Microsoft, but I didn't succeed yet.

Final Solution:

Install SteadyState from Microsoft.
Creater a new restricted user and apply maximum restrictions.
Use GP to change the Winlogon Shell from explorer.exe to my program in the restricted user.
Use TweakUI to enable Autologon with the restricted user as the default logon.

Thanks guys for your help!