The following is a decent link on what to do before...attempting an upgrade install of XP.http://www.aumha.org/win5/a/xpupgrad.php
I think that you'll find the general feeling is that it's safer/better to just do a clean install. Upgrading from one to the other does nothing to negate any system problems which previously existed...and these may carry over to the new operating system.
Ditto for hardware problems.
Ditto for malware problems, IMO.
This seems to be your situation, http://support.microsoft.com/kb/164486http://windowsxp.mvps.org/ginadll.htm
I think I'd download the file, double-click on it, and hope that it solves the situation. I suggest trying that first