mlange.
Your best bet, is to do the following.
Use PC Doctor DOS (MultiPurpose Device) and make sure the hard drive is not failing. This is very important first step. If you have failing sectors, or read input/output errors, it wont matter how hard you try.
You can TRY to flag Windows XP to do a chkdsk on the drive, it might fix itself, this can only be done upon initial boot anyways, you cant do a chkdsk on primary partition, and is advisable.
Secondly, I advise you to go get AVG Rescue Disk. At this point, you need to scan the drive and make sure its clean, clean, clean, of all crap that could be interfereing.
Please note, that AVG Rescue works off of linux, and if you do a alt+f6 (or is it alt+f7) you can see a log of what has happened (alt+f1 will bring you back to the AVG menu). So do this after AVG has tried to mount all partitions. if you see Errors, you know its the drive, if its not, well, continue to scan. make sure you do an update if possible (I highly suggest the AVG Rescue USB) for scans, this allows you to update the virus database.
Between PC Doctor, and AVG Rescue Disk/USB I really have not NEEDED much else, and have managed to clean and rescue about 99% of systems, and/or data on this systems.
There IS a third step, but Im sure you have already done this. Use the Windows install disk, and go into recovery mode, and run the required tools to restore the booting. Alternatively you can do a 'rescue' install if memory serves.
google 'using windows xp recovery console'
Good Luck
Thomas