kairosbro4849,

Replace it with System File Checker. Go to Start|Run, enter sfc /scannow and click OK. Note that there is a space after sfc. You may be prompted to insert your Windows XP reinstallation CD.

Try re-installing the Directx version that you have. Believe current versions for XP are Directx 8 or 9. It is available from Microsoft.

OR if your spyware program has an undo, archive feature, or auto quarantine (such as with AD-aware) try that.

There is a possibility that your DXDIAG.EXE is not a legitimate Windows file:
http://www.2-spyware.com/file-dxdiag-exe.html

(If that’s the case, and you already cleaned the infection), to stop the error message, remove the corresponding entry form the Startup:
http://www.fixyourwindows.com/optimizewindowsstartup.htm

All the Best!