Occurs when the permissions are twiddled with and you don't allow "everyone" access to the swap file. This is not a stock setting on a fresh install and I've yet to see the issue on a new install. Always self-inflicted.
Here's article about it -> http://support.microsoft.com/default.aspx?scid=kb;EN-US;Q315270
Just installed XP. Windows keeps telling me at every reboot that I don't have a swapfile or it's too small. It's true that it never creates a swapfile. I've already set it to "none", "custom" and "let windows manage it" to no avail. I found a couple of reg values that said "pagefile.sys 0 0".
I edited it to say "pagefile.sys 512 1440" but on the next reboot the same message appears. I've installed XP a couple of hundred times at least and never run across this error. I've googled for an answer but have found nothing remotely like what I'm experiencing. Any ideas?