Chris,
There are several ways to get your system running without
re-installing the operating system and starting all over.
When you have the opportunity to re-boot in "Safe Mode"
chances are that you can recover. XP will hang for several
reasons and getting your files should be your priority. After
you have copied (not using back-up utility) your documents,
make a copy of your address book too. If you have not already done so,
have a separate hard drive to save stuff and use your firewire
connection instead of USB if you can, it will be faster and you can
save more info without lost packets.
Chances are that you opened an e-mail and or attachment that started
this problem and it will get worse. If you made a "Restore" point that
is at least a day or two before your problem occured, you may be able to
get past the problem that way too. Hope this helps you, Good Luck!