The warnign has validity but there's no danger in looking at the folder c:\windows\system32\config where the Registry lives to see if you have any recent files called system.bak, software.bak and security.bak. There's nothing to lose by renaming the files of the same name but with no extension so they become .old files, then renaming the bak versions by editing out the extension. If you're no further forward, you can undo the changes.
Of course you need to do this in the Recovery Console or when using a Linux LiveCD or Hirens Mini XP but it is worth the trouble.
EDIT - Forget the Recovery Console - XP Home probably doesn't have it. You could, however, Google for and download RC.iso
The instructions from kb307545 don't say it won't work, just that you may have password issues later in repair console. Microsoft gives this warning for those with factory installed OEM versions because as Microsoft says "We don't know what changes the companies are making to our system" and so they cover their rear with that warning.
The instructions are a bit tough to follow. If you are willing to download a 160MB file, an ISO, and burn it to disk I can help you do this a lot easier.
Get this file I posted to 4Shared.com...2005
Burn it to disk and then boot with it. When the screen asks about network configuration, click Skip.
After it loads, it will ask which Windows installation you would like to log on to, if any are available.
If one is available it will continue to load and when ready, you click the start button and go to System Tools and the bottom choice is to perform a Restore Point Rollback, choose this.
When done, restart computer and see if you have joy.
If it reports there is no Windows install to log onto, continue.
When the program has finished loading you will have a Windows Explorer type feature available to use to move,copy,rename etc. to make the task of kb307545 very fast and easy.
I used the ERD to access my system files. Not only was my system32/config folder empty, it was corrupt
I renamed the folder, created a new config folder and copied my repair files into it. I was able to restart Windows but it has reverted to the original condition. Fortunately all my important files were backed up.
It's weird, my programs are all listed in the start menu, but I'm not able to run them.
Thank you so much for all your help... I really appreciate it!