If it's a HDD issue, you'll have to slave it on another machine and extract the data you need. If it's a Windows issue, your best bet is to boot from the XP OS CD and use the repair option. When you get to the DOS screen, run a chkdsk /f and see what you get.
I've had machines blow up and a simple chkdsk with the /f switch will make it all better.
After you get into the GUI, run scandisk and defrag and scan the hell out of the HDD with a virus scanner (I still use AVG http://free.grisoft.com). Then go out to http://www.sysinternals.com and download the TCPView and Autoruns programs. Check for open ports (indicate a possible trojan) with the TCPView program and use the Autoruns program to find the stuff that starts on boot. That'll get you started.
Will the original XP install disc repair the SP2 system?
Bookmark - I might need this advice for a computer I'm fixing. Thank you!