Thank you for asking your question here.
I'm sorry you're having this issue. The error you report is difficult to diagonse, but there are two primary causes, one is a problem with a device driver, the other is that the system has been inproperly installed or the installation has been altered (as with a virus.) Because of what you've tried and the way you're now experiencing the problem, I suspect it's a nasty virus.
At this point, I'm afraid that your best course of action is a hard drive format and software reinstallation. I'm sorry I don't have better news for you.
Here's the method:
Boot the computer using the XP disk. Insert the disk. Turn off the machine and turn on with the disk still in place. (Hold the power key down until the machine turns off, then turn back on.) The machine should give you a message saying something like, "to boot from cd, press any key." If you don't get this message, you may have to change your bios settings to boot from cd. (Let me know.)
When you see the "Welcome to Setup" screen, you'll have some options:
Press ENTER to start the Windows Setup. DO NOT choose "To repair a Windows XP installation using Recovery Console, press R." If you repair using the recovery console, you'll lose data, so DO NOT USE IT.
Accept the License Agreement and Windows will look for existing Windows Installations.
Choose the XP installation you want to repair from the list. (You probably will only have one.) Press R to start the repair. If REPAIR is not one of the options, END setup.
Setup will copy the needed files to your hard drive and reboot. Do not press any key to bott from CD when the message appears this time.
Setup will continue as if it were doing a clean installation, but your applications and settings will remain intact.
Once you are working again, you willl need to run Windows updates. You should run anti-virus and anti-adware programs before updating your Windows. If you think you have a virus and AVG and SpyBot have missed it, let me know and I'll give you some more information.
I hope this is helpful. If not, then post back with your questions/concerns and I'll continue to assist.