BSOD - OS reinstall not working - help!

Hi,

I have a blue screen of death with the message:

STOP: c0000218 {Registry File Failure}
The Registry cannot load the hive (file):
\systemRoot\system32\config\SOFTWARE
or its log or alternate.
It is corrupt, absent or not writable.

I was going to use the microsoft link to repair this through the recovery console, however I've taken advice not to since I have an OEM-installed operating system.

I've therefore tried to repair through the XP CD (I managed to get one from Dell...eventually!).  However, I get to a screen that asks me to install or delete partitions and doesn't mention repairing....

I've also run the diagnostics and it came up with a failure on the IDE Disk S/N test of:

Error Code 0F00:065D
Msg: IDE device failed: The self test filed the read portion of the test

What is my next step?  I need to recover my personal dataand have had advice to use a USB Enclosure and then potentially using other methods of repair...

1) I have no idea how to recover my personal data - this is important to me - can you advise on best course of action (never used USB Enclosure before (v computer illiterate!!))?

2) what would you advise my next step would be?

Any help would be greatly appreciated!

Thanks