Using the recovery disks supplied with preloaded systems will take your sys back to brand-new state, causing you to lose all data.
Your idea of loading XP onto another hard drive and copying data off the old one is best.
Your sys is unble to read its registry from the hard drive - running chkdsk with the correct parameter to correct errors can sometimes solve this. I do not know what is on your disks, but a borrowed XP installation cd would give you a Recovery Console, from where you could run chkdsk /r
Or, you could download and burn to a cd this iso, then boot from it : http://www.thecomputerparamedic.com/files/rc.iso
It is a Recovery Console.
illahae commented: The guy/gal is a frickin wizard! +1