Whew... it only took me 5 (!) reinstalls of Windows in 24 hours to get it right,
but I'm finally running again -- and with SP2 fortunately.
A quick overview about why it took 5 tries:
1) Reinstall Windows XP SP1, then a few drivers including ATI video drivers, then SP2
Result: exactly the same as installing it on the working system -- it won't boot anymore!
2) Reinstall Windows XP SP1, then SP2 immediately, no driver install
Result: worked for a moment until I installed the ATI video drivers again and tweaked settings
3) Reinstall Windows XP SP2 (quickly downloaded), so no update necessary
Result: after tweaking some settings, very very unreliable system, with disk corruption
occuring for not particular reason
4) Reinstall Windows XP SP1, then install drivers and tweak settings, NO SP2 update
Result: Still the same! Unreliable performance and many "Delayed Write Failed" errors
(again resulting in tons of disk corruption)
5) [FINAL] Reinstall Windows XP SP2, NOT tweak settings
Result: Well, I'm still working with it!
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In the end it turned out that the ATI video drivers (Catalyst) doesn't like the "System Cache"
performance setting (aka "LargeSystemCache" registry setting) AT ALL. But it took AGES to
figure this bit out. Now I've got it set to "Programs" again, and no problems so far...