Maybe I'm not explaining this correctly, let me try to clarify.
I am running the XP disk on boot. It boots to the disk without a problem. Goes to a blue screen with the words Windows Setup in the top right corner and a white bar at the bottom. As it is loading, along the bottom it goes through a few messages (if you need to load scsi raid drivers, press F6, if you want to use ASR, press F2, Setup is loading files...). Then it says at the bottom setup is now loading Windows or something and before it reaches the Windows Setup screen (http://www.getpcmemory.com/pics/windows_xp_installation_welcome.gif
), it BSOD's with the 0x6F. So I cannot access the recovery console at all.
So here's a quick recap: Windows alone won't start at all regardless of what start-up option I use due to a missing or corrupt \WINDOWS\SYSTEM32\CONFIG\SYSTEM. I boot to the disk and am unable to access the recovery console due to a 0x6F BSOD which happens before I reach the Setup options screen.
I apologize if I wasn't clear in my original message. I'm just losing my mind over here trying to get this thing to work. Thanks again.