It's one of those software design decisions that makes you scratch your head and wonder, "What were they thinking?"
The "it" in this case is XP's most powerful rebuild/repair option, and yet Microsoft chose to hide it behind seeming dead ends, red herrings, and a recycled interface that makes it hard to find and (at first) somewhat confusing to use.
But it's worth exploring because this option lets you completely and nondestructively rebuild, repair, or refresh an existing XP installation while leaving already-installed software alone (no reinstallation needed!). It also leaves user accounts, names, and passwords untouched and takes only a fraction of the time a full, from-scratch reinstall does. And unlike a traditional full reinstall, this option doesn't leave you with two copies of XP on your hard drive. Instead, you end up with just the original installation, but repaired, refreshed, and ready to go.
We've saved this technique for last in our discussion of the various XP repair/rebuild options because the fixes we've previously discussed are like first aid--the things you try first. For instance, see this discussion on removing limitations on XP's Recovery Console, turning it into a more complete repair tool; or this discussion on the Recovery Console's little-known "Rebuild" command that can cure many boot-related problems. (There's also lots more on the Recovery Console here.
But when the Recovery Console techniques don't work, and you're facing the prospects of a total reformat/reinstall, stop! Try the no-reformat reinstall technique we're about to illustrate, and you just may get your XP setup running again in a fraction of the time and with a fraction of the hassle of a grand mal wipe-and-restore.
Go read the rest of the article with screenshots.
InformationWeek | Windows XP Management | Langa Letter: XP's No-Reformat, Nondestructive Total-Rebuild Option | June 19, 2006