Chkdsk saves the day again! Encountered this error on a Dell laptop today. The suggestion from the MS Knowledge base was to restore an older version of the registry :
http://support.microsoft.com/Default.aspx?kbid=307545
However I found when I tried to copy out the software hive that it was unreadable and couldn’t be copied.
After running chkdsk /r (from recovery console) it found errors and corrected them. After that – the laptop booted fine!
I still suspect the disk may have a hardware fault, however at least it’s in a state when files can be copied off – prior to an impending disk failure/reinstall.