I would definately remove this harddrive and place it in a known good system. Attempt to move the data you need off onto the known good system. Don't waste your time running chkdsk, unless you can't get the data off. Then use it to format the drive and place it back in the system, reload Windows...
PaulBarron, I ran into a similar problem after uninstalling a program that removed necessary pathing in the environment variable section of the system. Try this: Go to the control panels/system/advanced/environment variables and ensure that the following is at least there...
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