There are at least a couple of tools which can be used to try to repair the system.
Since it seems that you are able to boot into XP, I suggest trying the chkdsk /r tool first.
Start/Run...type chkdsk /r (with space between the k and /) and hit Enter. A screen will tell you that chkdsk cannot run, etc. and ask if you want it to run on the next boot. Type Y and hit Enter. Reboot the system and it will do what it can do to repair files, etc.
Upon completion, the system will reboot.
For the next part, understand that when I say MS XP CD, I do not mean any restore/recovery CDs which might have been provided by Dell, Gateway, HP, etc. Those are not MS XP CDs, they are special variations of same and do not necessarily include all of the tools or repair characteristics of a MS XP CD. If you don't have one, it's OK to borrow one or have someone burn you a copy of theirs...but you must have a valid license key in order to use such a CD to do a repair install.
In all cases, the CD must reflect the same version (XP Home or XP Pro) as you have installed on the system.
If you still have problems, the next thing I would suggest would be an attempt to run the sfc /scannow command (space between the c and the /). To run this, you will probably also need a MS XP CD that reflects the current SP level of your system. If the system is current through SP2, then the CD must have SP2 on it. If the system is current through SP3, the the CD must have SP3 on it.
If you have a CD but it does not reflect the same SP level as your system, you can slipstream a CD which will be an updated version of your original install CD. There are many websites which have instructions on how to do this, including http://lifehacker.com/386526/slipstream-se...installation-cd
I tend to prefer this link because it uses nLite, which I think is the easiest tool to use when slipstreaming. If you use it, please read carefully and follow the suggestions made.
Finally, my ultimate repair trick is to do a repair install of XP. The same rules apply with a repair install as apply with running sfc /scannow...the CD must reflect the same SP level. More info on a repair install follows:
How to perform a repair installation of Windows XP if Internet Explorer 7 is installed - http://support.microsoft.com/?kbid=917964
How to Perform a Windows XP Repair Install (Stevens) - http://www.michaelstevenstech.com/XPrepairinstall.htm
If you have questions, please ask before proceeding