This bug has been "bugging" me now for 3 days !!!! Thanks to ScinteX, my bug has been squashed !! Directing the start-up to the windows/windows32 directory and copying the userinit.exe .... really did the trick.
Thank you very much for posting the solution and to the others that identified the same problem.
Remember to enter your BIOS screen [F2] on boot-up and change your boot priority to the CD and have your XP CD inserted. Then hit the [R] for the restore page. I guess you could also just select option 1 [ENTER] and re-install the OS but ScinteX's fix is perfect.
RS