Your registry is corrupted...
Can't remember which one, but it's definitely under this hive:
HKEY_LOCAL_MACHINE (HKLM)
HKLM means all the settings for a particular machine is stored
there. Edit the wrong thing, delete the wrong thing, you basically
will be gone case.
And you need the original XP disc to recover, not recovery discs...
it won't work no matter what you do to it.
I have no idea if System Restore ever works, because if you can't
even start Windows, I don't see how you could get to System
Restore. A repair will work fine, it won't delete any of your
files, except replace all important Windows files and repair the
registry.