I've had a problem similar to this a few times on the same machine, and i found a different (and slightly convoluted) way to work around it.
Equipment:
-2 PCs (the messed up one and a working one) with the same basic OS, having the same updates on both PCs is a plus.
-1 external USB hard drive case to match the type of HD it is
I happen to have these lying around my house, but I'm a special case.
Method:
-Take the HD out of the messed up PC, stick it in the HD case, plug it into working computer.
-On the working computer, navigate to the path where that particular '.sys' file is.
-On the messed up HD, navigate to that same folder.
-From here, you copy the .sys files from the working one to the not-working one, replacing them. You might want to backup the .sys files in there first, just in case. You can either copy the one .sys file it stops on, or copy the entire set of files just in case it hangs on another one. I personally copied all of them.
-Stick the HD back into the gutless PC, turn it on, it should run fine.
If you have to do any more updates, do so. I did this when my Alienware conked out on me after I was tinkering with it. I had XP Pro SP2 + extra stuff. I was able to restore it using my mom's IBM with XP Home with no Service Packs at all. I had to Reinstall SP2, but that was all.
I hope it's not too late and that you haven't erased everything yet. I don't think harddrive cases should be too expensive, or hard to find.