lsass.exe An internal error has occurred in RPC

Hi,
Something is preventing me from installing Windows XP SP2.
I am running XP professional SP1. When I install SP2, all seems to go well, the installation finishes, the computer reboots, goes to the finishing installation stage, then the starting windows screen appears and a message pops up which says "lsass.exe An internal error has occurred in RPC" with an OK button . Click OK , computer reboots (have tried from windows update, download redistr, safe mode and straight to SP3 all have the same result).
I get back to where i started by running windows repair with sp1 disk and restoring system state data.
Have ruled out malware infections with chaslang at this thread : http://forums.majorgeeks.com/showthread.php?t=173151
Any ideas appreciated.
Sereg