For a proficient computer user, it's relatively easy to format a hard disk - you've just got to be careful. Really I would treat it as a last resort, as it requires backing up everything you want to keep; a reformat will delete EVERYTHING from a hard drive.
Try glb613's suggestion first, to reinstall Windows. However, if this does not work again, you might want to consider reformatting, as it ensures you are creating a completely clean version of Windows. It could require a lot of work though, backing up files to put them back on the hard disk, reinstalling programs, updating Windows again.
Look at http://support.microsoft.com/default.aspx?scid=kb;en-us;316941 for more help on reinstalling Windows XP. For the reformat and reinstall option, look down towards the bottom of the page to the section titled "Perform a clean install of Windows XP".
Make sure you are confident in what you are doing before beginning the process.