In the wallpaper stage
try pressing ctrl+alt +del to fire up task manager .
If it responds then there is a possibility to cure ur comp .
If task manager is shown , then try to end the process "explorer.exe" in thhe second tab.
then click new ->task (or something like that) from menu bar and type explorer.exe and press run.
If start bar shows up , u can use this process to work in ur computer every time u fire up .
else try this .
in the LOGIN Screen ( as u say u have a password ) press ctrl+ald+del twice.
That will show u a dialog to login as ADMINISTRATOR .
u have to type administrator and provide a password ( usually blank in most cases ) .
if u made throw it to desktop , create a new user and check whether u can login with that user account .
If nothing helps Use this Last but powerfull weopen against any Microsoft product -Reinstall XP