Since the partition is FAT32, you could boot to a network boot floppy and copy your files to another machine. This would be a good idea just as a backup.
The problem appears to be a corruption in the SYSTEM hive. Have you tried the Last Known Good Configuration? Press F8 at the boot menu and try it.
You can do a reinstall of the operating system without losing data. I recommend installing into a separate partition if one is available. You could also remove the hard drive and put it in another machine to copy off the data then wipe the drive and re-install.
This was first published in May 2001