Try following steps before reinstalling XP.

1. Download and run Hijackthis.exe. Click on "Scan" and post the scan result on the web. Some experts will study your result and point out the suspicious items.
2. Turn system restore OFF and run hijackthis.exe again. Scan your system, select the items under suspicion, and click on "fix checked". Scan again. If these items are gone, your system might become normal again.
3. If these items are still running, it means the "bad files" associated with these items can not be deleted under the Windows environment. Write down the names of these files (in the scan result) and download a program to try to delete them at the time when the computer system starts to boot (before Windows starts). Usually these files should be deleted. I've forgot the name of the program. It might be moveonb or something similar. You may use google to search and find it.
4. If these files cannot be deleted at the system booting time, they have to be removed under the DOS mode. Use google to search "UBCD4Win" and make a bootable disk (CD) to boot your system in the DOS mode (NO Windows). You need your XP system disk to make the boot disk. Under DOS mode, one can delete almost any files.

GOOD LUCK!