Well I've achieved a fix. Of sorts.
I did a full fresh install of XP from the Dell emergency disk. When installing, it gave me the choice of 2 areas for the install - I'm presuming these related to the 2 SATA HDs in the PC. Anyway - when I selected the first (ie the "old" C drive, where windows was originally installed), I was told that there was an "other" operating system there, and it couldn`t be overwritten.

So, instead, I selected the second (ie presumably the old D drive, which I used just for data).
Anyway - everything installed, and booted up just like a fresh XP installation. I go into "my computer" and on disk D there are all my original data files (plus a new Windows folder), while disk C looks the same as it always did (including the old Windows folder)

Added to that, on bootup now I'm given the choice of 2 operating systems. You've guessed it, XP, or XP.
If I select the first, I go into my new fresh installation. If I select the second, the system hangs, just as it has been doing for days.
My next step is to invest in a new virus checker, and give everything a good scanning. Any other suggestions?
Oh, and presumably I can just delete the original Windows folder on disk C?