I have had a very cursory look at this (hooked up the external screen, booted into Windows and spent 30 seconds fiddling) and had no success. I'm not saying that it's not supported but if it will work it does need at least some configuration.
My Macbook works with an external display in bootcamp, I would assume the iMac would too, unless it is dependant upon what gfx chip you have(Intel vs Nvidia).
a macbook with an external display... now THERE's an interesting concept... not really a laptop, more of a lapmonitor... by the way, I want a copyright on that phrase (lapmonitor) or patent or trademark or whatever.
My iMac and Dell 2007WFP work perfectly fine as a dual-monitor setup in XP, I'm not sure what the trouble is you guys are having. I just installed the drivers and that was it. Two 20" screens.