I had same problem on 3 different systems - not hardware related I wouldn't have thought but perhaps related to downloading so many updates at once causing some sort of conflict? Machine I am using now has all critical updates installed and works fine but the updates would have been installed as and when they became available. All my systems had SP2 installed and all others who have reported this to my knowledge also had SP2 installed. Haven't yet downloaded post SP2 updates one-by-one to discover which update causes this, but in my experience, it ISN'T KB890859 which many other discussion forums suggest it is. I did clean install, downloaded all updates except this and got BSOD back. Tried many discussion forums, none seem to be able to get to bottom of this. When I've got some spare time I might d/l updates one by one and catch bad update - someone needs to get to the bottom of this! Until then, I'll just leave all post SP2 updates off.
If anyone who knows for sure which update is the problem could post it & can save me the job of downloading one by one to find it, I'll be grateful as I have to ring Microsoft every time to activate product now.
Once we find which update it is, solution should be to insert winxp installation cd and boot from this. Select recovery console and run batch files (ie type batch, then filename) in c:\windows\$ntuninstallKB890859$\spuninst directory (where KB890859 is replaced by offending update).
I have just recovered from the same problem and thought I'd share how I fixed the system.
I had a client's machine with XP Pro SP2 beta (2096) and it had various issues that I had just corrected. However, when the current XP updates were applied (about 36-40) it restarted with the C0000269 error between kernel32.dll & gdi32.dll. After many hours of research, and finding the most helpful post here, I removed KB896424 and the error changed to a problem between user32.dll & ntdll.dll. I then removed KB890859 (I actually just restored user32.dll and Win32k.sys from the backup). The system started but explorer did not run, however I was able to run the system restore and undo the last updates and everything was good.
I tried to re-apply the updates, except KB896424, KB890859, & KB912919 (due to the fact it also replaces gdi32.dll), and then after trying to log on (with any ID) I got this error
"The System cannot log you on due to the following error:
The program issued a command but the command length is incorrect". That was resolved by using "Last Known Good Configuration" at boot up. After a few moments I was yet again able to run system restore.
After that I decided not to apply any more updates as I could not remove the beta of SP2 or apply the proper SP2 over it.
So, in short. Removing KB896424 & KB890859 (there by replacing gdi32.dll, user32.dll, & win32k.sys with files from 3/11/2004) and then launching rstrui.exe to restore the system.
Hope that this helps someone!
It would have been a really nice feature of XP if one could just run the system restore utility from the "recovery" console! (or some sort of PE boot)
Good Luck to all that need to recover from this error!