Update: After more attempts I found that F10 got into a recovery console and with nothing else to lose I chose the non-destructive option. Amazingly after 15 minutes or so it re-booted into a curious hybrid, where all my previously installed applications and files are present and correct, yet the main O/S still thinks its back in original purchase configuration. I'm now taking the plunge and allowing it to update to XP3, and then I'll work through the rest. And yes it does have up to date and frequently run Anti Virus and Anti Spyware, and I had tested her downloaded pictures.
In consultation with my young nephew, I think (if this continues to work), we will regard it as a warning and get a brand new HDD and carry out a full re-install.
Thanks for now.....