First step to try:

- boot computer from Windows CD and choose repair (R)
- from command prompt run: chkdsk /r
- when checkdisk finishes, remove Windows CD and boot WindowsXP normally.

Second step to try:

- Follow procedures from Microsoft on how to recover from a corrupted registry that prevents Windows from starting  http://support.microsoft.com/default.aspx?scid=kb;en-us;Q307545

Thirs Step to Try:

- made sure ACPI, Plug & Play, USB all enabled in BIOS
- moved mouse from the ps/2 port to the first USB port
- booted using Safe Mode
- waited until it hung at Mup.sys
- removed the mouse cable from the USB port
- (3 seconds or so pass, the screen went black and safe mode appeared)
- restart the system
- boot normally into XP