In the worst case your going to have to re-install XP. And that will mean
lossing your user files. So DON"T DO ANYTHING UNTIL YOU"VE THOUGHT ABOUT IT.
I had a similar experience a few day ago, but that was because I'd changed
the motherboard. XP doesn't accept changes of the HDD (System Volume) or the
Motherboard without complaining. I was expecting a "too many hardware
changes" type message but only got into the loop you found.
I suggest as a minimum you do the following.
Get a start-up floppy from a previous version of Windows. Win 95, 98 etc.
boot from this on start-up. (You may need to go into BIOS to change the Boot
sequence.) Then attempt to access the C: drive from the A: prompt. You should
be able to see the directory structures by doing a DIR. If the C: drive is
not accessible, check that the BIOS is recognising it. A failed HDD (C

rive)
may be your problem. If you can get access to the C: drive, you must get you
user data off this before proceeding. If your computer has two HDDs and BIOS
can see both, you may be able to copy data from one to the other. (Use the
Copy command in DOS) Otherwise, the best plan would be to get, or borrow,
another HDD and install this in your machine. You can then install XP on this
and then Phone Microsoft to get it re-activated. (Make sure you get the
Master/Slave the right way round and/or set the boot partition correctly.)
Once done you can pick up the user files (My Documents) from the other drive.
The important thing is. If you existing drive is OK, so are your user files
(My Documents) Don't try to re-install XP before getting this data off. XP
will format your HDD (deleting all the user files) if you try to re-install
it.
Because you can't access XP, you can't make a back-up (.bkf) file. which is
what you should have been doing regularly anyway, but most people don't.
Hope this helps. Don't panic. Don't act without thinking. Good luck :-)