I've come in late on this, but there are some steps you could take if you haven't yet gone down the reforamtting/reinstalling/virus-removal path yet.

I had an similar problem to yours a year or so back, though unlike you I couldn't start in safe mode. It turned out that a lost file fragment was causing the problem. You could try the following:

• Boot your computer from your Windows installation CD rather than your hard disk (I'm running XP as well).

• Don't reinstall; instead open the recovery console when given that choice.

• Run "chkdsk.exe c:" (if c: is your boot drive) from the console. I can't remember all the options, but I allowed the program to recover any lost file fragments automatically and report back.

That solved the problem for me. If it is a virus, at least this won't do any harm.