Two points:

In User accounts, Mik shows 1.05 gb, Unknown shows 2.5 mb - could I simply delete Unknown?

IE7 not working properly - have to log in to this Forum almost every time, even when I enter a second time the same day.

OK - good XP automatically boots up. There is nothing I want to save from the bad XP.
..... could I simply delete Unknown?

Yes.

For IE7, have a look here; How to reinstall or repair Internet Explorer in Windows XP

OK - Unknown deleted, IE7 reset. On reboot - opened with bad XP.

We are not making any progress - how can I delete the bad XP?

OK - Unknown deleted, IE7 reset. On reboot - opened with bad XP.

If "Unknown" was the "bad", and it's been deleted, I don't see how the machine can boot to it.

Are you/were you seeing/operating in different partitions (ie; C and/or D) when booting to either OS?