Does Windows XP treat loopback processing differently than Windows 7? I have 4 various screen saver timeout GPOs (1 hour, 4 hour, disable, etc.) and they are set up the same way the answer in this post explains: Group Policy Exemptions using filters. The security filtering for the GPO is set up to give read and apply GPO permissions to "Domain Users" and an AD security group which contains computers only. Authenticated Users has been removed completely The GPOs are linked to OUs with only computers and loopback processing with merge mode is being used. It appears that all 4 GPOs apply when a computer is a member of only 1 of the AD security groups (they are all getting applied under "User configuration"). On Windows 7, the correct GPO applies (in RSOP it shows up once in computer config for the security group and once under user config). Why are all GPOs being applied under user configuration for Windows XP?
There is no substantive behavior difference between Loopback Policy Processing in Windows 7 versus Windows XP. I've got multiple Active Directory environments in which I make heavy use of Loopback Policy Processing and introducing Windows Vista (back in "the day") and Windows 7 machines into environments that already had Windows XP machines using these Loopback Policies did not create cause for modification.
I suspect that you're seeing the policies not applying properly for some other reason. Two machines with the same security group memberships located in the same OU, one XP and the other Windows 7, should apply the GPOs in the same way (assuming no machine accounts are named in ACLs on any of the GPOs-- please, never do that!).