I've run into this on a heavily modified XP. The user had installed many toys and tools and even been in the registry and had shut down too many services. While Black Viper is great about telling what services do what, they didn't read the fine print.
It took about an hour of uninstalling toys, then the tool IEFIX from http://www.mvps.org/sramesh2k/IEFIX.htm was run since it makes SFC and IE repair easy.
The atapi error could be some DIRECTCD, INCD, FileCD, DLA or other CDRW as disk drive software. If so, I have no trouble uninstalling such for the update.
I am trying to install windows service pack 1
but i get the error message c:\windows\system32\drivers
\atapi.sys is open or in use by another application
please close all other applications and retry.
I went into task manager and closed all the apps
that i could, the only ones that are open are ones that
xp deems critical. I also went into msconfig and
removed the ticks from everything and rebooted.
I tried to run sp1 from safe mode but it wouldn't let.
My copy of XP is professional and original not copy.
I hope someone can help