Boot from the Windows XP CD-ROM into the Recovery Console to do the diagnostics and (possibly) repairs. You'll find some info with http://www.google.com/search?&q=Xp%20%22recovery%20console%22
It might well be, however, that Compaq didn't supply the XP CD-ROM, only the recovery CD. That's cheaper for them (and for you), until things go wrong like this. Then I would advise to call Compaq tech support or go back to where you bought the machine. The causes for your problem can be many, but some hardware failure is likely.
If the Recovery CD says it will wipe all your data, it will surely do so. But, depending on the problem, it might have a data saving mode of operation, so to say. Your manual, or Compaq tech support, will be able to tell you so.
The hard disk being only temporary storage (might be for a month, might be for 10 years) it's good practice to make 'backups' of what you don't want to lose. Not doing so saves time but is risky. The choice is totally up to you.
Hope this helps.
Need advice, please. My Compaq Presario 700 with XP crashed yesterday. I have Roxio GoBack 3, but it fails to recover---just sits there and runs for hours and hours. I have now disabled GoBack 3 and inserted Norton Systemworks CD (which says it can be used as a recovery CD)--it gave me a WinXP screen at first (with no other words or symbols on the monitor) but now has nothing but a blank blue monitor.
(I'm using another computer in the same household to do this message). Any advice would be appreciated.
(p.s. I have 3 CDs for Compaq QuickRestore, but I a note that comes with those CDs says they will erase all data on my hard drive.)