This problem would seem to be a compatibility issue caused by update KB890859
from reading other threads.

Try fixing in this speed related order:-

Solution 1:
Insert winxp installation cd and boot from this. Select recovery console and
run batch files in c:\windows\$ntuninstallKB890859$\spuninst directory.

Solution 2:
Insert winxp installation cd and boot from this. Go along as though
installing windows for first time. When it detects the existing windows
installation choose 'r' to let it repair. Although I tried this, I had
previously reverted my kernel32.dll to the original which probably caused
recovery problems having installed SP2 which I presume has a different kernel.

Solution 3:
Take hard disk out of affected machine and put into place of hard disk on
machine known to work with this update. Boot up in safe mode. Go to
add/remove programs (ensuring show updates is checked). Remove KB890859. Swap
disks back.

Obviously, steps should then be taken to ensure this update is not installed
in future - turn off auto updates for a start.

I also heard something about disabling the L1/L2 cpu cache in BIOS works for
a similar problem. My BIOS does not give the option to disable though so
can't test this - might be even quicker fix. Disable cache, uninstall update,
enable cache.

Hope this helps someone out there. After trying allsorts, my machine is now
too far gone to resurrect so will need a clean install again! If when I have
a go at fixing my friends these steps don't work, I'll add another post.