BleepingComputer.com: Problem creating new user account

I have a laptop which uses Windows XP professional service pack 3. I am trying to stop my children having full access to download whatever they want which causes the computer to slow down. I wanted to create a limited user account for them and this worked a dream on my desktop which has Windows XP home edition. However when I try and do it on my laptop I am faced with problems! The user account showing is 'Administrator' and I cannot change the name for this. When I try to create a new user account it says that at least one person must be the administrator and will not allow me to make the new account limited. If I do designate the new account as a 'administrator' then I lose the original administrator account including all the files. I managed to get these back by doing a system restore.
What I do not understand is why when I try and set up a new account it doesn't recognise the Administarors account as the computer administator and allow me to create a new limited account.
Thanks for any help you can provide.

Try booting into safe mode, login to Administrator account and try out again.

Thank you for responding Nikas.

There is no difference to the options in safe mode. Just to be sure I'll explain what I did:-
I entered user accounts and under the 'pick an account to change' I selected the administrator. The only options open to me are to create a password, change my picture and to change my .NET passport. There is no option to change the name as in XP home. I then selected 'Create a new account' which was to be the account my kids can use with limited access. I selected the name for the new account and selected Next. I then get the message that I must create at least one computer administrator before I can create other accounts. The limited option is greyed out.
I tried to do the same as I did yesterday in safe mode and again I have lost the initial administrator account and all the programs and files associated with it (it has now been properly restored.)
It seems to be that as soon as I try and create another computer administrator the original one disappears making it impossible to retrieve my old files.
Any other ideas?!

Nikas,

I have found the way! For future queries, what I did was to:-
Open computer management
In the console tree click users
Right click the user account and then select rename.
Type in the new name and press enter.

Once I did this I was able to set up my kids account and the limited option was not greyed out.

Thanks again.