syetem is the compressed down part of your registry, if you navigate to that folder there also should be a system.sav file that was created when the pc was installed, you can copy the syem.sav overtop of system w/o the .sav. It will take your pc back to where it was when installed, should not lose any data. If your pc will not boot you can do this from the repair console or slaving this drive to anothe pc. Maybe too advanced. Also in the c:\window\system32 besides the config foldr ther may be a restore or another name close that should have a close to exact copy of the system file. If you copy this over to config overwritting the corrupted system. I think this is only if you had system restore on.
Another option that may work is to boot off of a retail xp cd, do just lke you are installing xp for first time. go ALL the way till you get to the part xp finds your installation and SHOWS it to you and asks , what you want to do, select repair ( do not confuse with the repair console at beginning) you will have to activate xp again, so more than like ly you will need the cdkey off of your machine. If you have a xp cd that is oem, from likr dell, gateway ..etc you may want to call them, get the first and last name of who you talk to,,,, do not reformat if you have data you need.