Since the page file is already set to zero, try selecting "No paging file", reboot into Safe Mode, and then delete the hidden file (C:\pagefile.sys). Then reboot again. Afterwards, set the page file as "System managed size". Reboot again. Then attempt to set the page file with a custom setting, and reboot once more.
Be sure you do all of this using an administrative account.
I suggest leaving a minimum sized file of 2MB on C:, if you intend to move the bulk of the page file to a partition on a separate hard drive. This really helps avoid these kind of problems in WinXP, IMHO. Look at this link for more information, under <A HREF="http://aumha.org/win5/a/xpvm.php" target="_new">Problems with Virtual Memory</A>.
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