Does Windows XP have an application that'll find drivers for new hardware?

It does, but, in my experience, it’s not very reliable. If the component was made by one of the large companies, it shouldn’t be a problem. If not, well, then it might be a bit of an issue (nothing Google can’t find, most of the times).

My experience has been different from bob’s, Microsoft Update takes care of it very well.

I rarely download drivers, I let Microsoft take care of it.

Especially since the non-Microsoft downloads often include junk I don’t want, like the Yahoo & Ask toolbars. And every printer and scanner company wants to put its proprietary photo management software on my machine.

MS Windows Update simply gets the drivers without the extras.

And as bob says, if any particular driver is missing you can probably find it via Google.

PS It will take time and probably a bunch of restarts, but you don’t have to actively monitor it, just turn on Automatic Updates in the Control Panel and let it grind away in the background.

It depends on your hardware. You can do a driver search from Device Manager. If Windows finds a suitable driver on your machine, it will enable it. If not, it can look for one on the Web, but it won’t always find what it needs.