Once you have the comp running in safe mode try a system file check:
To run this press START, RUN and type SFC /scannow. (note the space between SFC and /, it is part of the command)
This will cause a system file check routine to begin which will check all the major system files for you, have the XP install disc handy as it may call for this if it requires to copy a file, and while it is not documented anywhere, if SFC replaces a file I would re-boot to make sure the file takes effect.
If this does not correct the problem go for a repair, this will retain all your data but I suggest you back up anyway just in case something goes wrong, this option will replace all the xp system files with original copies so will knock out SP2/Updates and any restore points leaving your system vulnerable to virus infections of the net, particularly Balster and Welchia variants which are now free roaming, once done enable the xp firewall before reconnecting the phone cable, then log onto Microsofts update service and download all the relevant updates.
This will work for all versions of XP except some OEM and some supplied as pre-installed in which case you will have to contact the vendors help desk to obtain the relevant information on how to re-install XP.
Full details can be found here on how to perform a repair install of XP.
http://www.webtree.ca/windowsxp/repa...isting%20Setup: