I use Windows XP with a wireless router and Microsoft Security Essentials anti-virus and anti-spyware. Is the Microsoft firewall sufficient or do I need to use Zone Alarm or similar?
The firewall that Microsoft introduced with the Windows XP SP2 service pack provides a basic level of protection from external attacks: it blocks unsolicited inbound connections to your PC. Like other "lightweight firewalls", it also offers ease of use, and does not consume a lot of your PC's resources.
Whether you need better protection depends on a number of factors. These include where the PC is used, how much effort you are willing to make, and the types of internet site you visit.
For example, if you use a PC behind a NAT router or an external firewall, if you are running anti-malware software with an anti-intrusion guard, if you are security-aware enough not to fall for phishing links/fake codecs/malware attachments etc, and if you use mainstream web sites, then Microsoft's firewall should be more than good enough. However, if you carry your PC around and connect to unknown networks, don't have good anti-malware protection, will happily click on links or unscanned files from people you don't know, and download pirate software/music files/pornography from insalubrious parts of the net, then you should use the strongest firewall you can get. And even that might not be enough.
A strong firewall will check both incoming and outgoing internet traffic, and it may well stop outgoing traffic from programs that you have installed unless you tell it explicitly to allow them. In many cases, you will not recognise the filenames, and you will need to do some research to find out if they are legitimate or not. After a few days, however, the firewall should be aware of most of your software, so it will stop asking about it.
In general, I think it is worth running a good firewall, and there are several free ones. The two main candidates at the moment are Tall Emu's Online Armor Free and Comodo Internet Security. Both companies also offer paid-for software.
Online Armor Free is powerful but relatively easy to use. It includes HIPS (Host Intrusion Prevention System) and a Program Guard, but if you want a quieter life, both of these can be turned off by right-clicking the Systray* icon for a pop-up menu. It also has a "Run Safer" option that enables you to limit what programs can do even if you allow them internet access.
Comodo Internet Security is another strong program that includes HIPS and an application monitoring guard called Defense+, which tends to pop up even more alerts. However, when you install CIS, it allows you to choose the level of protection you want. You can have Firewall Only, the default middle way, or high-level Proactive Security, which uses all Defense+'s monitoring capabilities. Again, you can configure the program via a right-click on the Systray icon. Gizmo's Freeware (formerly Tech Support Alert) has a guide: How to Tame Comodo Defense+ Without Disabling It
The site also provides a much longer and more comprehensive guide to the Best Free Firewall