My .02:
The original problem was \windows\system32\config\system... You know the one.
The first question I always ask is was the issue preceded by a power interruption, aborted restart, ungraceful shutdown... and so far, when the question is answered, it is always in the affirmative. I have pulled the plug on many systems many times here just to recreate this problem in my own back yard so I can know how to fix it.
I would always advise booting into RC somehow (usually having to make a CD), run chkdsk /r and see what is left to fix when it completes. Sometimes, chkdsk /r will fix this problem right up. It is not always a missing or corrupt file - Windows starts to load (obviously) and then can't find the file. Sometimes you can't even get to the folder when you boot RC - until you run chkdsk /r.
If chkdsk /r doesn't work, continue troubleshooting, but only after you know the file system is not compromised. Often, the KB307545 is suggested straight away, but this does not make much sense to me if the file system is compromised, so always start with chkdsk /r first.
You still need to boot RC anyway, so go ahead and run chkdsk /r. It will not hurt anything and then you will know what it is not. Copying a bunch of files around with a suspicious file system does not make sense to me. Verify the file system, then if files need to be copied, copy away.
It doesn't make any difference if it is an OEM system or not. chkdsk is chkdsk and when you boot on RC, chkdsk does not care where the system came from - it is just an NTFS file system to check/fix.
akatonbo never answered the question about the power interruption, but did eventually run chkdsk /r which "fixed an error (or errors)" and then the system could boot into Safe Mode.
We don't know if the system could boot Safe Mode before the chkdsk /r, but I think it would not have been able to get that far - without running chkdsk /r and the fixing of the "error (or errors)".
It sounds like the original problem is resolved and I think chkdsk /r is responsible for fixing that part. I think with the original issue, always ask the power question and always run chkdsk /r from RC first. Always, always, always

Then fix what needs fixin'.
Now there is a new problem. The system will only boot in Safe or VGA mode!
Hamluis, I am not following your message

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Chkdsk /r should not have been a viable solution to get beyond where he was...yet it seems to have allowed that.
Why do you know think that chkdsk /r is not a viable solution to resolve the original issue? Do you not think it should be done first and why not? I think chkdsk /r is what allowed the boot in Safe Mode. I think it is the first thing to do with this issue and I think without it, Safe Mode would not have been possible