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ONLY Computer wide settings are reflected in all accounts. Example: You change the computer time, ALL of the accounts will have the changed time. You reconfigure a printer in the Hardware Manager, ALL of the accounts will have the change. You install a program like Microsoft Word, ALL the accounts can use Microsoft Word (if you let them). These are system wide settings.
Open up My Computer, double click your main hard drive (usually Local Disk C), then double click "Documents and Settings". In this folder, are more subfolders of all the user accounts on your computer.
For example, if you have the following user accounts: Mom, Dad and The Kids, you will see the following folders,
"C:\Documents and Settings\Mom"
"C:\Documents and Settings\Dad"
"C:\Documents and Settings\The Kids"
And inside those folders will be each accounts settings and files. For example, Mom's "My Documents" is located in "C:\Documents and Settings\Mom\My Documents" and her Favorites are located in "C:\Documents and Settings\Mom\Favorites". Same with Dad, Dad's "My Documents" are in "C:\Documents and Settings\Dad\My Documents" and so on.
This is how Windows XP manages user accounts, a folder for each user. Each users settings (settings from the Registry and whatnot) also reside in the user's respectable folder.
Now, if you install a program in Mom's account, you can log into The Kids and use it. You don't have to install the same program in each user account. Once it's installed on your computer, it's installed and all user accounts can use it. When you install a program, it's usually installed to the directory of "C:\Program Files\(Program name)", NOT the folder that contains the user accounts.
Now, to create a new user account, go to the Control Panel either through the start menu or My Computer, click "User Accounts" > Click "Create a new account". Type in the name of the account, this is what is seen on the login screen, and in the folder "C:\Documents and Settings\". Next,you have to choose what TYPE of user account you want it to be. You can choose between "Administrator" or "Limited". It's very simple, an "Administrator" account has complete access to the computer, whereas a "Limited" account cannot install programs, change system wide settings, or make any changes outside of their own account. If "The Kids" have a habit of installing software you don't like, keep messing up the network card, or like to delete files they shouldn't be deleting, make them be a "Limited" user account. HOWEVER, some programs REQUIRE Administrator access to them, and if they do, you have to let them be an "Administrator" account or you can right click on a program shortcut, choose properties, then under the Shortcut Tab click the advanced button. You then want to click the button that says to "run with different credentials." This will pop up a box (similar to the 2k style login screen) that allows a user with different privileges to run a program.
Now, as far as your shortcuts and the others getting mixed up, they wont. The only shortcuts that mix are the "All Programs" shortcuts to programs. For example, go to Start > All Programs. You'll see a list of all installed programs. Now, when you install a program in Dad's account and because when a program installs, ALL user accounts can access it, you see the shortcut to the program in all of the user accounts.
So if you install Program A and DO NOT want to let The Kids have access to it, here's what you do.
Go back to "C:\Documents and Settings\". Now, go to the "All Users" folder. Inside this folder are things that all user accounts will see very simply. Now go into "Start menu" and into "Programs". This is where the shortcuts to all your "All Programs" are stored. Simply move Program A from here, to your own user accounts folder. So in essence, you MOVED the shortcut "Program A" from "C:\Documents and Settings\All Users\Start menu\Programs" to "C:\Documents and Settings\Dad\Start menu\Programs" and if Mom needs it, COPY it to "C:\Documents and Settings\Mom\Start menu\Programs".
This does not necessarily stop the kids from using the program though, they can explore the hard drive and find the program and execute it that way.