multi(0)disk(0)rdisk(0)partition(2)\windows\system32\drivers\(whatever name).sys
Whats the last driver name (.sys) on which windows stucks ?? That device might be creating problems for you ... unplug all periphrals like modem, lan card etc and then boot again.
For formatting you can boot from a windows xp cd and the setup will guide you through a new install of xp.
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