Max
thats the method which can go badly wrong.....
The repair disk needs to be of the same type as the original installation: ie XP Home disk on an XP Home installation, Pro on Pro. If you use the wrong version it either won't install - or it will wipe the user profiles
For that matter, if the partition table or MFT is in anyway damaged, then that will also result in the loss of data - even though it appears to be repairing the drive.
Besides which, programs will get orphaned because their DLL files get zapped,and their registry integration lost. Internet Explorer will may stop working because you've just overwritten it with an older version. Any registry damage will NOT be repaired, and theres a good bet that any viruses which are flying around will still be there.
You should only really use that technique when you are stuck for time, and when theres a real imperative to get the machine working temporarily. Once you've used it, you should back the files up and reload the machine at the earliest opportunitty.
Besides which, if you use the technique on a Windows XP machine that uses SLP activation, then the activation string on the hard drive gets wiped and windows refuses to boot. It also won't allow you to activate, not even in safe mode. Sometimes you can work round it by installing Internet Explorer 7 or 8 in safe mode (which in itself isn't supposed to work), rebooting and hoping that you can then activate windows.........
Seriously, its really something to be avoided except in desperation