Fold - not entirely sure what sort of nasty-ass bug you've got there... But I do have an idea for ya -
http://www.pchell.com/support/lookfor.shtml
I know that by DEFAULT, XP probably has the "system restore" function turned on.... You'll have to turn it off (its in the "System Information" section of your Control Panel) and follow their instructions on the website to remove the evil hack :grrr: