yoyo!
Finally got everything back to normal.
As iinfi said, it was a problem with the userinit key in the registry. I restored the old registry from one of the system restore files in my windows partition.
For those who might end up with such a problem later [Or if you wish to restore your registry to an older version - probably if some virus corrupted it or something] then do this:
Use Windows XP Installation CD to go to Repair mode.
Then type:
dir "c:\system volume information"
Change to the Restore Point folder by entering
cd "c:\system volume
information\_restore{bb7e35f9-d278-45fa-9dde-fe709cd0f23d}"
^^ Value in { } will vary..
List the Restore Points by typing "dir", choose the second to the latest
one, and change to its snapshot folder.
cd "c:\system volume
information\_restore{bb7e35f9-d278-45fa-9dde-fe709cd0f23d}\rp1219\snapshot"
^^ Again the value after \rp#### will vary... choose from the dir listing
Copy the following config files to the \config folder by entering
copy
_registry_machine_system c:\windows\system32\config\ system
Repeat for
sam, security, and software . Then copy 'default' by entering
copy
_registry_user_.default c:\windows\system32\config\
default
Thats it!! Registry restored to old backup
PS: I used ubuntu to do the above tasks... Sometimes it helps to have 2 OS!!
Thnx to everyone for helping out!