I would boot from the Windows XP cd-rom and load the setup program. Then do a repair of the current installation. It'll theoretically put back all of those important system files you may be missing/are corrupted.

Problems along same lines - XP Home Edition developed 'cannot mount boot volume' error (BSOD) at boot up. Ran the recommended recover console, chkdsk /r, fixboot to no avail. Ran a repair install of XP Home. Am able to boot into safe mode, but normal boot sequence is Windows Logo, screen flash then black screen and hung. It would seem that something is amiss in the normal configuration that prevents booting vs. safe mode which always boots. Any ideas?

Tyr this...
Insert the Windows XP CD into the CD drive.

Click the Start button and then click Run.
The Run window appears.

In the Open: field, type the following line
X:\i386\winnt32.exe /cmdcons
where X is the drive letter of the CD drive.

Click the OK button.

Follow the instructions on the screen to finish setup.

Click the Start button, click Turn off the computer, and then click Restart.


And if that does'nt work...

To run the CHKDSK /R command, perform the following steps:

Insert the Windows XP CD into the CD drive.

Boot the system from the CD drive.

The prompt Press any key to boot from CD... appears.

Press the space bar.

The Welcome to Setup dialog box appears.

Press the <R> key to repair Windows by using the Recovery Console.

Select the number that is associated with the Windows installation you want to log on to, then type the administrator password (or press press the <Enter> key if no administrator password exists).

From Recovery Console, type the following command:
CHKDSK /R

Press the <Enter> key.

From the Recovery Console, type the following command:
exit

Press the <Enter> key to restart your computer.

If the system still will not boot to the hard drive, attempt to run the CHKDSK /R command again. Depending on the corruption on the hard drive, it may take several tries to achieve a complete repair.