XP won't load - can't boot from CD - HELP

I have an Acer One netbook (it has no floppy or cd but I have an external cd that I have been using to try to fix from) It is loaded with XPSP3
When I went to load XP the other day, I got BlueScreen saying there was an error in system32/config

I have tried everything I know to get it to work with no luck. I can access the drive fine using puppy linux and have copied the data files that I wanted to keep and figured I would just reformat the drive and reinstall XP. I have tried every bootable CD (including the original XP disk) that I could find on the net and I cannot get anything to start without it coming back to the same error screen. The only thing that I have been able to get to work was the puppy linux boot cd. I am pretty sure the HD is still good since I was able to see and access files using puppy. I really don't want to buy a new HD for it as it is not worth it at this point. What else can I try to fix this and/or reinstall Windows XP??

Thanks!
Darryl
Utah, USA