XP hangs during Windows Logo and progress bar screen

Microsoft did an update 10-5, it asked for a restart and after the computer will not go pass the logo screen in normal mode. Also, after the restart, Microsoft Security Essentials, Windows firewall and systen restore were disabled. Recovery Console would not run.
XP would start in the safe mode and runs just fine with no printer, sound, etc.

The people on the malware side had me run 6 or 8 programs which deleted some cookies, trojans, etc. They declared the computer clean and sent me here.

I have repaired XP twice and updated to sp3 once.

Recovery Console now tried to run. When I'm asked if I want to run C:\ or E:\ when I select C:\ nothing happens, when I select E:\ it asks me for an admin password which I have never installed. E: was cloned from C: a year ago.