It is probably a corrupt driver, given how far it seems to get in the boot process - unfortunately, it seems to be a critical driver. This may indicate a problem with the hard disk.
Booting from the installation CD and attempting a repair is one (remote) possibility, but realistically, there are 2 things to be done - either a clean install on a new hard disk (keeping the old one with the data as a second or external disk), or attempting a re-install / repair in-situ.
With the latter, you can boot off the install CD, then select install, then choose repair existing (not recovery console). It should (that much over-worked word), overwrite corrupt files and result in a usable system, with user accounts, data and applications left intact. There's a good write-up
here, but google "XP repair install" or Repair existing XP and you'll find more.
Whatever you do, try to take a backup before you begin - connect the disk in another PC, or in an external caddy. At least then if anything goes wrong, you have a recovery.
Just because the disk isn't currently bootable doesn't mean the data is inaccessible.
SD