Aside from trying to repair part of Windows, or, worse yet, living with the 95/98/ME look, I'd like to suggest downloading a theme Microsoft released for download last year. It is a modified, spiffy looking-version of the standard XP Luna theme, originally designed for Windows Media Center 2005, but now available for everyone. After clicking here to download it, you can unzip the package, run the installer, then go to the directory c:\windows\resources and double-click on the file "Royale." If just the themes, and not the utility, are corrupted, this will work and make your desktop look better than before.
If that doesn't work, you can use a repair installation of Window o correct the problem, but that assumes your Windows XP CD has that option. (Most OEM "recovery" disks lack the repair feature.)
Finally, since it appears that the theme utility is shot anyway, you might want to consider downloading a modified uxtheme.dll file that allows you to skin your desktop to your liking. (At this stage, you don't have much to lose.) You can click here for instructions on how to download/replace the file, or download/run a free utility that will do it for you. Using either method will allow you to choose from thousands of themes with are not normally accepted by Windows. While it's unsupported by Microoft, I've had much success with it.
Hope this helps,