XLiveCD sounds good: it uses Cygwin. Cygwin is free, and includes an X server.
See
http://cygwin.com/, and for info on installing see
http://cygwin.com/cygwin-ug-net/setup-net.html#AEN194
Note one trick: the default install is minimal - no X, it's barely serviceable. If you select All when selecting packages (click on "Default" until it changes to "Install"), then you'll be installing over a GB of programs.
One more trick: there are lots of mirrors of Cygwin, and because it's big and frequently updated, often the mirrors are incomplete, especially while major updates are rippling out.
I haven't been able to convince anyone to run my script that automatically runs the md5 sig checks and "publishes" the results at the root of the Cygwin mirror. So I'm afraid checking the mirror's integrity is left as an exercise for the reader. (Tip: download and check the download, directory by directory.)
But usually the mirrors are okay.
Don't forget to run mkpasswd, mkgroup (with both -l and -d options), and run ssh-host-config to setup ssh after you've installed it.
Oh, and when you ssh into the Unix box to run the X application, use the -Y option on ssh, not the -X.
From WinXP to Unix with X-window