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Steps to Repairing Windows XP
1. Put your Windows XP Install CD into your CD-ROM drive.
2. Reboot your computer.
3. Let your system boot off of the CD.
4. Let the Setup go through the first part of the Installation procedure.
5. When you come to the screen in which it says "Welcome to Setup." press Enter to Setup Windows XP, do not press R as this will just start recovery console.
6. Press F8 to agree to the End User License.
7. Let the Setup search your system for previous versions of Windows.
8. When the Setup is finished searching your system, select your Windows XP Installation and press the R key on your keyboard to start the Repair Procedure.
This is the part that might scare the you-know-what out of you. The Setup will delete all major system files and then replace them with new copies.
You will have to download all of the updates from Microsoft Windows Update again because it replaces the files.
Don't worry, your user data is still intact. Nothing has been lost, nothing has been deleted. Your data is safe, just the OS has been repaired, so relax.
There is nothing to worry about as long as you follow the steps to repairing Windows XP.
You can also review the instructions in this MSKB article:
How to Perform an In-Place Upgrade (Reinstallation) of Windows XP (Q315341)
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