Well, any user can create new users that have the same account level or lower than the account creating it. In other words, a user account that is a member of the administrators group can make an account that is a member of any group including but not limited to the administrators group. A Power User can create Power Users, regular Users and Guests, but cannot create Administrator accounts. Likewise, Users can create Users and Guests, but not Power Users or Administrators. There is no way for a user account to create an account with a higher status than itself, or else the user of said account could escalate themselves to higher levels, which of course would be a vulnerability. So, yes a normal account can create other normal accounts, if that is what you want to do. One note; the default windows xp user accounts control panel won't let non-admins create new user accounts, however, it can be done through lusrmgr.msc (Local Users and Groups snapin) or using the net user command.
Hope that helps.