Cannot logon to XP home

I have XP Home sp2. The computer will boot. XP logon dialog giving user name and asking for password opens with "Shut Down" as the selected option. That's as far as I can get. If I click on "Okay", the computer shuts down. If I select "Standby", it does so and when awakened re-displays the same logon dialog. If I select "Restart" it does so and re-displays the same logon dialog. If I select "Shut Down" it does so.

It's a used PC which came pre-installed and without XP cd of any kind. Booting in type of safe mode is pointless - the same logon sceen is displayed after a few seconds.

It started on first re-start following successful virus scan and removel. I'll take any solution, even if all data gets lost. I just need the XP up and running...