I installed SP2 on my home machines a couple of months ago, no prob and the company pushed SP2 down to all the machine in the company via SMS...not heard of this one.
Try pressing F8 during boot, and when you get to the startup choices menu, choose Safe Mode. Go through the boot, and shut the box down. Start it back up and see if it doesn't boot fine. If it does, go to the Microsoft Windows Update site and get all the latest patches.
Best bet, however much of a pain it is, would be to reformat and start from scratch, install XP and then apply all the patches, up to SP2.
Windows is a house of cards. You have attempted to apply a sledge hammer fix to a house of cards with lots of evil drones in place of the necessary cards. Won't work.
It's actually a good thing, if this is what is happening, that your PC has blown up on you. God knows what those evil drones have been doing to you while resident on your PC.
Checked your credit rating lately?
I've got another problem and rather than starting a new thread may I borrow yours? I must have gotten a spy nasty on my system and I can't find it. Any time I type a word like modicum, document, cucumber, the 3 letters C-U-M end up underlined and become a link to porn. Just as the words sex and... you get the jist. I found an unknown media player installed a few days ago, my step daughters use the computer as well, but aren't supposed to download without my OK. Anyone else ever have this problem? I've run Adaware 6.0 and webroot's 'SPYSWEEPER" and they can't find anything. For me to do this manually... ughh...
I run McAfee, Spybot and Adware on my XP. When I downloaded the SP2 it screwed up so many programs and was an overall pain. I removed it and will never try it again.
Good luck to you.