With this week's unveiling of threedegrees for MSN Messenger and the Windows XP Peer-to-Peer Update, users got a taste of Microsoft's plans in the P2P space. But the experience quickly turned sour for many who were left with broken Internet connectivity or an inability to reach certain Web sites including those of AOL and retailer NewEgg.com.

Developed by Microsoft's NetGen group that was first established almost three years ago, threedegrees virtually connects people so -- as Microsoft puts it -- "they can do fun things together." The idea is to enable social interaction within a group of friends or family by extending standard instant messaging with music, group chats, digital photos and personal desktop animations that Microsoft calls "winks."

In order to bypass the myriad of issues caused by consumer firewalls and routers prohibiting peer-to-peer connectivity, Microsoft looked to IPv6. The company released this week in beta form a Peer-to-Peer Update that upgrades Windows XP to the next generation IPv6 network stack. The update also installs NAT traversal technology, dubbed "Teredo," enabling threedegrees to work in a shared network environment.

Microsoft is pushing the new technology with the Windows XP Peer-to-Peer Software Development Kit, announced alongside the update and threedegrees.

The SDK "will enable developers to create applications that will allow end users to communicate and/or collaborate in real time in ways they have not been able to before," a Microsoft spokesperson told BetaNews. "For businesses, this will result in a new dimension of functionality with reduced deployment requirements. And for users, it not only means exciting new applications, but also being able to use existing applications in ways that have not been possible before."

However, a flood of problem reports following the release of threedegrees and the Windows XP Peer-to-Peer Update emphasized the pre-release nature of the software.

Incompatibilities with virus scanners such as McAfee VirusScan left a handful of early adopters without functioning Internet, even after threedegrees was uninstalled. NetGen representatives narrowed down the problem to certain third party software and said Microsoft was following up with McAfee on the issue.

A more widespread issue stemming from non-standard DNS servers caused numerous problems for many who installed the Peer-to-Peer update. Users found themselves without access to their favorite Web sites, questioning the intentions of Redmond.

But NetGen team members found the culprit and said they were investigating a possible workaround. "The current issue with resolving certain domains is due to a flaw in the implementation of the dns server running on that domain having to do with DNS query types for AAAA records," wrote a Microsoft employee by the name of Tripp on the threedegrees message boards.

"The correct behavior for DNS (RFC 2308) is to reply to a AAAA request with NODATA (which indicates that the name is valid, for the given class, but are no records of the given type) if no IPv6 addresses are available . Certain domains respond to AAAA requests with NXDOMAIN which means No Such Domain Exists, and therefore any IPv6 enabled browser would not be able to resolve their site," said Tripp.

Microsoft plans to release the final version of the Windows XP Peer-to-Peer Update and SDK in the second quarter of this year. In the meantime, the company says it will work to resolve any problems reported in the beta.