I've just recovered from this problem. My computer, two harddrives both with a separate XP installed both messed up with a similar problem this morning.
They were fromatted XP installs as well. Hardrive is in perfect healthy conditions.

I'm still stuck with one of them having this problem - I've managed to get through on one drive and clean install XP. I'm now going to slave the worse one and try to fix the error in the C:Windows\System32\DRIVERS folder and also rescue my info.

Ractive,

To save you probelms: get into BIOS setup by pressing Delete key at bootup first screen and wait (usually)

Then change the Boot first device to CD-ROM

Save changes (usually F10, Y and Enter)

It'll reboot to the CD-ROM

Swapping over the first boot device only swaps where the system loads up from first. Nothing will happen to your hard drive or its info.

Then go to Jephree's above post and follow the instructions mentioned before he mentions a "clean install".

Thats the last step if all else fails and it deletes everything on the hardrive already.

Let us know what happens, it can be daunting if you've never done it before, but its actually pretty straight forward