No response following logon

After turning machine on and logging on, the task bar, side bar, and desktop
icons appear as usual. But there is no response to left-click or right-click
anywhere that I can find. The only thing which produces any effect is holding
the power button down, which eventually powers the machine down.

I have a sidebar gadget which shows CPU usage. As normal, following logon it
fluctuates for a minute or so. Then it settles down to absolutely zero. When
the machine is working normally, it rarely goes below 1 or 2% even if I'm not
doing anything.

Restarting in Safe Mode, or Safe Mode with Networking, everything is fine,
apart from the normal Safe Mode restrictions like no printer. I am using Safe
Mode now.

This problem started a day of so after the last prompted Microsoft update,
which I think from memory was "Service Pack 1". I have used System Restore to
go back to before this, with no apparent effect on this problem.

System information:
Windows Vista Home Premium
Notebook PC from Evesham Technology (now sadly gone bust)
Processor AMD Turion 64x2 Mobile Technology TL-56 1.81 Ghz
Memory RAM: 2.00 GB
System type: 32-but Operating System

Help please!

Further update on the problem.

Powered up and logged on today and briefly the system seemed to be working
as usual. Open browser and got home page. Opened email client, still fine.
Clicked on a bookmark for a different web page and browser froze. CPU usage
at or near zero. Clicked back on email client and that window appeared over
the top. Clicked on Start, and the panel with the option to select Control
Panel came up, clicked Control Panel but then it died completely. Nothing
else produced any response. Powered down and restarted in Safe Mode to type
this. Browser Firefox, email Thunderbird.

Will now try again with different browser and avoiding email client, and
report back if that avoids the problem. If I don't post again soon, assume
it's the same with IE.

Tried again, but this time decide to open Task Manager before doing anything
else. Clicked Start, clicked Control Panel, which came up in Classic View,
clicked for the Control Panel home page, and everything froze. So definitely
not the browser.

Help still needed PLEASE !