Would Tor help protect against hacks/ID theft? My particular concern is for when Windows XP security patches are no longer available as I really don't want to upgrade my OS.
Because Windows XP are mentioned I guess that you mean attacks targeted at clients (not servers). Let's look at some possible attack vectors:
- Attacks from malicious or compromised websites or other services
- Through Tor you connect to the same services using the same protocols as without Tor. The main difference is that the communication between you and the Tor exit node is encrypted and that the service does not see your IP address. There are no important differences regarding your vulnerability.
- Malware distributed by e-mail or mobile media (like flash drives)
- Here Tor is not much involved in the distribution path. There will be almost no difference but see the "call home" below.
- Attacks using redirection of your traffic by compromised DNS (name -> IP address resolution)
- Tor uses a modified resolution mechanisms. Some attacks of this type targeted at non-Tor machines could be less effective here.
- Attack on the communication path close to the client (on the home network, company LAN, premises of the ISP...)
- Here Tor will help because the communication at the attack points is encrypted by it but this is not a very common attack vector.
In addition to the above: If your system allows only toriffied connection through an explicit local proxy (SOCKS) then it could make "call home" of a malware difficult but the malware creators could introduce new malware which will be able to communicate through the Tor proxy.
Summarised: In general Tor will not improve resistance of your system to common attacks. Tor is a tool which allows you to improve your anonymity and confidentiality when properly used and when your system is secure against attacks. It will not protect you against attacks targeted at vulnerabilities of your system.