We had a client with an old XP machine that wouldn’t start. It gave the error about the “System” file. I was able to use Bart PE, go into the restore directory and replace the corrupt files with the last restore and get the machine to work again. I used the following tutorial.

http://www.tomjepson.co.uk/fix-missingcorrupt-system-file-in-windows-xp-without-recovery-cd

I hope this helps someone else out there.