Ouch- it's really strongly recommended that you
not upgrade to SP2 on an infected or otherwise problematic system. Bad Things can happen, as it seems you may have discovered.
I'm quite certain that the Atlcu32.exe file is a component of a malicious infection, but it sounds like you'll have to get past the boot-up isue before we can deal with disinfecting the system.
Let us know whether or not you can even get into the system via Safe Mode and we'll take things from there.
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Wombat At Large
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since Dec 2003