Yes, I think you can recover your data. You may also be able to repair the problem. Since you are posting here, I assume you have access to a second computer. Go here for instructions which may help you.
http://support.microsoft.com/default.aspx?scid=kb;en-us;314058
This article describes the functionality and limitations of the Windows Recovery Console. If your Microsoft Windows XP-based computer does not start correctly or if it does not start at all, you can use the Windows Recovery Console to help you recover your system software. This article discusses the following topics: •How to start the Windows Recovery Console.•How to use the Command Console.•Restrictions and limitations of the Windows Recovery Console.•The commands that are available in the Windows Recovery Console.
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When you use the Windows Recovery Console, you can obtain limited access to the NTFS file system, FAT, and FAT32 volumes without starting the Windows graphical user interface (GUI). In the Windows Recovery Console, you can: •Use, copy, rename, or replace operating system files and folders.•Enable or disable service or device startup the next time that start your computer.•Repair the file system boot sector or the Master Boot Record (MBR).•Create and format partitions on drives.Note Only an administrator can obtain access to the Windows Recovery Console so that unauthorized users cannot use any NTFS volume.

Thanks. But, when I run a chkdsk from the recovery console it only gets 35% through and then says that "the volume contains one or more unrecoverable errors". I'm not sure how to recover my data at this point. Any ideas?

Might have a bad drive on your hands there...

The question is if it is a physical problem then are there reputable companies that can recovery the recoverable data? :eek:

If the data is important enough to pay big money to recover.
You may be able to put in a new hardrive load windows ,then slave the old drive and axcess it to take the Data that you need off the drive ,

Before I gave up, I'd try a few more resources. I think there is also a way from the Recovery Console to copy your files to another media (CD-ROM for example).

How to restore the operating system to a previous state in Windows XP
http://support.microsoft.com/kb/306084

How to recover from a corrupted registry that prevents Windows XP from starting http://support.microsoft.com/kb/307545/EN-US/
How to manually start the removal process to remove Windows XP (If you cannot start Microsoft Windows XP in Normal mode or in Safe mode, you may have to manually remove Windows XP.) http://support.microsoft.com/default.aspx?scid=kb;en-us;312569

Sounds like a bad HD, see if you can move the drive to second machine as a slave and pull off data. If you really need the data I would suggest sending it to OnTrack, I have had good experiences with them recovering data. It is a good idea to have an image of your computers and automated backkups, then if you have a problem all you do is reimage and then install the backups.

What can u expect, it microsoft, they could at least give you more specific error messages.