Well, I'm not exactly sure of where to put the test.py file. If I put it on the desktop and then just run command prompt, it says python is not recognized. This makes sense since python is not saved on the desktop :p
So I tried moving my test.py file to the python directory, and then changing the command prompt directory to that. When I do this I get:
Microsoft Windows XP [Version 5.1.2600]
(C) Copyright 1985-2001 Microsoft Corp.
Now the python command is available from any directory (you have to re-open command prompt first), so instead of littering your python directory with your scripts, you can just navigate to the directory that your script is in and in command prompt do python script.py .
Better yet (I know this works on Vista and 7; not sure about XP), if python is registered to handle .py files (the installer sets this), you can just navigate to the script directory and do script.py and windows would load it into python for you.