RESOLUTION
To resolve this issue, restart the computer with a Windows Millennium Edition Startup disk, and then perform each step until the problem is resolved:
Modify the WinBootDir entry in the Msdos.sys file to point to the correct location of the Windows folder.
Extract a new copy of the Ifshlp.sys file to the Windows folder and extract a new copy of the Imagehlp.dll file to the Windows\System folder.For additional information about extracting files, click the article number below to view the article in the Microsoft Knowledge Base:
129605 How to Extract Original Compressed Windows Files
If you determine that the Vmm32.vxd file is missing or corrupt, you must rename the file to Vmm32.old in the C:\Windows\System folder, and then reinstall Windows Millennium Edition to re-create this file.