r2,

Can you boot from the WinXP CD? If so, you could try the recovery console, or go further into setup and try system restore. However, since you have important data on that drive, first I would try to remove it and set it up as a slave drive on another machine. Or you could buy (or maybe you have) one of those nifty drive enclosures that connect via the USP port. Then copy your files to two different locations i.e. master drive on the working machine, and also burn them to CD or DVD. After you are sure your data is recovered, replace the drive in the notebook and go from there either with the restore or by doing a fresh rebuild of the OS. Even though it's a lot of work and time, I most often will rebuild from the ground up as this ensures that the OS is loaded correctly.

Obviously, this assumes that your problem is SW related and not actually a dead hard drive.

I hope you find this helpful. Good luck!