CORRUPT PROFILES today, as handled by Microsoft is going to end badly. Even I have changed my mind about trying to fix a bad profile (that login that doesn't work.)
HOWEVER you should be able to move their files and more to the new working account and learn that old lesson about backup. Here's an article to help you along -> http://www.informationweek.com/news/services/showArticle.jhtml?articleID=199703624&pgno=3
This article shows you where the profile data is for XP and Vista.
Sadly you have to piece together what you want to move over.
My sister's brand new Dell (3 mos old) has Vista. This week, after an automatic Windows Update, she cannot log in to her Vista account. She gets an error pop-up that says "group policy client service failed login." I searched the internet and, while not really finding a solution, I did see several discussions of this dating back several months. I learned it was actually a problem with that particular User Account.
In this case, she had only one. So I rebooted into Safe Mode and created another User Account with Administration privileges. Sure enough, we can get into Windows using the newly created account, but It's almost like a new machine: All her emails, email account settings, browser bookmarks, installed programs, etc. are gone! (Although her pictures are still in the My Pictures folder! That and the installed printers are about the only vestige of the other User Account to be found.)
Get this: called Microsoft. They will not help her because being unable to login makes it "a password problem;" a security issue. They have no way of knowing whether or not she is attempting to "break into" someone's Windows machine!! (Technically, it is NOT a password issue; she enters the correct password to get into the User Account, then gets the "group policy" error. This is different than a Password error...I know, because we purposely put in an incorrect password, and only then did we actually get a Password Error pop-up box. When the correct password is entered she gets the "group policy" error.)
Anyone here familiar with this? Although, technically she can use her computer now, she has to start from scratch and configure Windows Mail, Firefox, etc. Of course, she has lost months worth of emails.