Bootup/startup system hangs after a cancelled XP SP2 update

Archived from groups: microsoft.public.windowsxp.help_and_support (More info?)

Hi All,

Trying to sort out a boot up problem for a friend, that's really got me.

System is Windows XP Home.
The problem started after the owner started to do the Windows Update of
Service Pack 2 over a modem.
At the point she was informed of the number of hours it would take, she
decided to cancel the install.
Unfortunately, she then thought the interrupted install would leave her
computer broken, so immediately did a system restore (without doing a reboot
1st).

What now happens is...
During boot up (even of safe mode), everything just stops at the point of
displaying the desktop.
It all stops displaying a black screen showing "Safe Mode
Microsoft...Windows XP...(Build 2600) Safe Mode"
I've even waited 30 minutes, (as there's a news article about a virus
pattern update crippling a PC)
However, the mouse is fully movable, and it even changes icon if I put in a
CD in (to the pointer with a CD icon showing that its having a look at the
disc).
But that's it, Ctrl+Alt+Del doesn't work, nor does Esc, Alt+Esc, Alt+Tab.

I've checked out loads of articles from Microsoft's site and here's a list
of what I've tried. None of them changed the behaviour.

- Booting from XP Installation CD and got it to put down the files on top.
- Installed a new copy of XP to another folder (c:\windows2), that works
fine. (And gives me the ability of exploring the file system)
- Installed a different Anti-Virus (Avast) on OS2 and scan returned clean.
- Installed a Spyware finder (AdAware) on OS2 and scan returned clean.
- Found an MS article on manually doing a system restore point, tried one a
month old, still no effect.

The only thing I'm suspecting now is some explore.exe extension that's
registered, but without the ability of booting the problem OS, I can't get
access to the Registry, nor the ability of uninstalling anything.

Cheers,
Kev.