To use the recover disc, you'll need to tap the appropriate F (F1, F2, F8, F11...?) key on startup, to access the boot menu. Or you can boot into the BIOS (usually delete key), and change the first boot device.
Once you do that, the PC will boot off the recovery disc, and restore the PC back to original factory settings. If you can get your hands on a full or upgrade XP disc, you can do a repair install.
Did all that and it worked, after which I made sure all available updates were installed including SP3, removed the boot disc and all appeared well and functioning normally. Then on attempting to start it up this morning, the same problem! Hanging at the start-up. Tried 'safe mode' and last known config but without success. I don't have an XP disc. I suppose it will work from the boot disc again but would like to get a permanent fix. Thanks for your help so far. Any other ideas?