Replacing the PSU is not a bad idea. The power supply is constantly sending power to the motherboard, optical drives, disk drives, etc. If at any moment that signal is lost even for a millisecond, the computer will reboot. This is signs of a bad power supply.
The UNMOUNTABLE_BOOT_VOLUME suggests that A) The boot sector of your hard drive has gone bad B) The RAM is failing. I would suggest re-installing Windows, but when you do, partition the first 5 gigabytes, and install Windows on the rest of the hard drive. Sometimes a sector on the hard drive will go bad, and will cause Windows not to boot up properly. To prevent this from happening, Run the Windows XP disc you have, and go into the Repair Console. It will be a black screen where you can type. Type in "chkdsk /r", it will begin scanning the hard drive for errors, and if it finds any errors, it will "quarantine" that part of the hard drive so it won't be used anymore.
Another possibility of that error is the fact that you might have bad RAM. RAM often causes problems like that. Blue screens happen frequently when RAM is failing. Try taking out one stick of RAM, and running the system on the remaining stick.
If you have anymore questions, let me know.
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