aggieforester05:

Your description of your system's behavior would indicate that you have been seriously infected with a bug like "sasser". The key was the Win XP Home SP1. You should be running SP2 with all of the current updates. It should also be behind a router or other hardware firewall as Harry suggested and using an up-to-date antivirus program at the very least. There are many ways to recover the system, but the easiest would be to recover your files and then reformat the drive and reinstall windows.

A better choice to boot your system would be Windows PE or Bart PE. Bart PE is probably more available for most people. That would allow you to write to your NTFS partition without much risk.

I would suggest that you do a search on "lsass.exe" and look at Microsoft .com for information on that process also, to better understand what might have happened.