I have noticed many posts on this forum of other people with the same issue, and many of these are not resolved yet.
I discovered a post by another member that helped me solve my problem, so I want to give other people something to consider in trying to solve this difficult problem if they have gotten it. I am NOT a computer professional, nor am I one of the certified BleepingComputer experts, but I did spend more than 40 hours studying this problem, analyzing my machine, and solving the problem over the past 5 days. So while my comments may not solve your problem, they may give you something to try that uses ONLY the standard tools that come with Microsoft Windows XP. There is nothing else to download, and no other programs that you need to trust.
Credit for the resolution of my problem goes to Brett, who posted the thread that suggested the MAGIC step: http://www.bleepingcomputer.com/forums/topic421299.html/
I have amplified his MAGIC step to suit my particular situation, but I suspect it will be similar for many other people who have this issue. The recovery steps that solved my problem are summarized below. They took about two hours to complete, once I figured out what to do.
1. If possible, start the computer in Safe mode
2. Open the TaskManager and see if you have a process dddddddddd:ddddddddd.exe running. If so note the random number prior to the [:]. You will need it in several of the next steps.
3. Delete the file in the C:\WINDOWS folder with the random number noted in step 2, and empty the Recycle bin.
4. Optional step: you may have a svchost.exe file in the Task Manager list of processes that begins to use considerable resident memory. If it increases too much, the computer will hang. Monitor this process and if the memory usage accelerates, end the process tree by right clicking on the offending svchost.exe process.
5. Run ‘cmd’ from the Start menu and execute the command ‘sfc /scannow’. This seems to be the MAGIC step. This will take 15-20 minutes, and it checks all of the windows files to insure their integrity. If it terminates successfully there is no message displayed.
Note1: sfc will hang and not complete if you do not delete the random numbered file in step 3.
Note 2: if you get an error message “RPC server is unavailable”, then go back to the beginning and try to complete the steps in Normal mode, where the RPC server is available.
7. Run ‘cmd’ from the Start menu and execute the command 'CHKDSK', but it will be in read-only mode and can not fix any errors. If there are errors, execute 'CHKDSK' again with the /r option so that it will fix the errors the next time the computer is restarted. Restart the computer so that it can check the disk. Repeat this step until you see that the errors are gone.
Note: you may have to defragment the disk before this is effective