I just received the same error message.  The twist I have is that my system (Dimension 8400) is configured as a RAID 1 (dual 160Gb drives).  When I attempt to Repair XP I receive a message stating there are no hard drives present.  The diagnostics I have run show the HDD's and tell me they are functioning fine. 

 

If I reinstall XP will I lose all data on both (redundant) drives?  If the HDD's are not recognized how do I go about reinstalling XP?