Hi and thanks for the information.
Having waded through it nothing jumps out as being particularly bad and I still haven't come across any other users complaining about problems of this nature after Windows updates.
The question is where do you go from here?
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If I were faced with your situation I would probably do a clean install of the OS to see if that made a difference and to eliminate the software environment as a possible cause. Having had to do a lot of troubleshooting of this nature I always keep a spare HDD for this purpose, rather than lose the existing system, if you have a spare HDD then this would be a relatively simple exercise. Just remove your current C:/ drive from your PC, replace it with the blank one, reinstall Windows XP and see if things work as they should.
If you don't have a spare HDD to do this then the decision is a little harder to make and only you can decide if the problem warrants either, buying a spare HDD or taking the time to back up the important things on your HDD (pictures, music, documents, e-mails etc) and then wiping the drive to start again.
If everything works with a clean install then you can be fairly certain that the problem is from the software environment, either a driver conflict or some such. If the problem persists then your original thoughts, of a possible hardware failure would be the more likely scenario.