I have actually solved this one, but I thought I'd share the drama anyway. Might even help someone else too.
A friend's laptop was producing some very obscure errors. After a bit of stuffing around, I decided to re-install Windows. Dug out my generic OEM XP Home CD & forged ahead. As has happened to me on previous occasions, the install process would randomly report that it couldn't copy a file. The end result was that the install was corrupted & wouldn't behave. For example, it wanted to be authenticated before I could even log in & it had skipped the bit where I could nominate the login name(s).
Then I noticed a post in one of the many forums that often bad RAM can make other components appear to be corrupted. Swapped out all but one RAM stick & suddenly, everything started installing & working as it should.
Wish I'd though of that in the first place, as I had only just put new RAM in that machine.