Internet Explorer (v6, anyway) only offers read-only access to webdav shares.
To get read-write access you
must have some other client software.
If the Windows "Web Folders" capability is being blocked by system admins, perhaps you can find another webdav client that is not being blocked.
Here's a link to a java-only webdav client:
http://sourceforge.net/projects/skunkdav/ I know nothing about java, but perhaps you could create a link on your server that allows users to download and run the client, thereby allowing them to access their webdav folder...
If I were a system admin who was blocking "web folders" in Windows XP, I'd also be blocking executable downloads, though, so this may not help...
If your users can install software on their work systems, you could turn on "shell" access on the SME box, then give them all "WinSCP" to allow easy access to their personal ibay on the SME server. I think WinSCP includes a folder synchronization mode...
Novell's "iFolder" project looks interesting to me - if you
can load software it allows you to setup local folders that automatically synchronize to your server; if you can't load any software locally it includes an ASP interface that allows browsing, downloading, and uploading of info that will then automatically synchronize to the systems on which you have installed the client (if any)...