I just got a Sapphire HD 3850 AGP card and installed it on my Windows XP SP3 machine. I installed the newest drivers from the Sapphire site and was prompted to restart. When it restarted it restarted itself again and gave me a screen saying, "Windows did not start successfully. A recent hardware or software change might have caused this." I started it in safe mode and uninstalled the display drivers. It worked, but had no display drivers. I've tried reinstalling the Sapphire/ATI drivers (9.9, 9.8, 8.1 which came with the device) and I get the same result every time - it installs, restarts and windows can't start up successfully with the new drivers installed.
My machine is an Intel P4 3.0ghz with AGP, Windows XP SP3, and a 550w power supply.
Did you try the ati drivers from their website instead from sapphire? Check and make sure all previous drivers are uninstalled even delete the ati folder in program files. Google how to remove all ati files. Reseat the card and that should help