You could try a windows repair?
If you insert the XP disc, go into setup, then go to setup screen not recovery console. Then it will detect a windows install, and you can press "r" on that option and it will copy new system files.
Its more like a soft reboot, when i did it, all my software was left working so it must copy reg entries but in all honesty i dont know, i just know it worked.
I had 100% same as you, the OS just deteriated over a few days, first i got errors with i think svchost or whatever its called where the system would should down in 1 minute, and then the whole windows shell didnt load, then no services would load, then that was that. Was doing a similar thing too, coppied files from 1 HDD to another HDD, then in the morning a whole host of errors. Strange, virus like almost.