Hi kmzpub,
Hmm.... I probably would have just installed SP2, once the SP1 files looked corrupt. Or uninstalled Sp1, if you selected the option where it creates a backup of WinXP Gold. You do realize that you brought a lot of that on yourself, by not being on the most recent service pack, and having all the hotfixes released since Sp2 installed right? That's one of the major ways that kind of software can crawl right onto your PC, is by not having an up to date operating system. It's about like leaving your door unlocked in a bad neighborhood, sooner or later someone is going to steal your stuff and possibly shoot you in your sleep. That can of course still happen, but why not make it difficult?
I'm sorry things worked out so poorly. I hope one of the previous suggestions will work for you. If those other tools are too expensive Acronis PowerTools comes with a program called DataRobot that has worked well for me, but any recovery tool is going to give you a bunch of crap. There are only two kinds of recovery not enough files, and too many. Either way you'll wind up with a lot of useless files, I'm sorry to say. The PowerTools suite, is a few years old and you could probably pick up a copy for no more than 30 dollars. Be sure you install this patch, because the CD erroneously came with the trial version,
http://www.rawseattle.org/~Christian/misc/DataRobotPatch(2003.4.4).zip. Basically this program was written by some Japanese people and I think there was a huge misunderstanding about what would wind up on the CD

. Funny really.
Tell me you were also running an AntiVirus program on your system like a responsible user?
The top two commercial AVs are Norton AntiVirus and Trend Micro PC-Cillin. In the freeware arena there are also options, though not as good. I can't think of the name of the best one, but Intel just bought them.
Also if you were backing up regularly, this could have been avoided as well.
The best backup program, hands down, for years in a row is Acronis TrueImage. It'll do backups at a scheduled time, while you work, without having to reboot or stop what you're doing. To restore you have two choices, overwrite a drive or partition, or you can mount an image in Explorer and work with it as though it were any other drive in your system until you get your files off of it.
For spyware removal and detection, the two best programs, both free are SpyBot: Search & Destroy, and Ad-Aware.
I'm not trying to scold you or give you a lesson, but I am trying to help you be a smarter user in the future.
Good Luck,
Christian Blackburn