I know you should copy this file from the windows cd to your system when you get this message. Problem is, does anyone know the command to do this? I'm not sure which folder to extract from cd/copy to system.
Boot from your CD and follow the directions below to start Recovery Console.
Insert the Setup compact disc (CD) and restart the computer. If prompted, select any options required to boot from the CD.
When the text-based part of Setup begins, follow the prompts; choose the repair or recover option by pressing R.
If you have a dual-boot or multiple-boot system, choose the installation that you need to access from the Recovery Console.
When prompted, type the Administrator password. (if you didn't create one try pressing enter).
At the system prompt, type Recovery Console commands; type help for a list of commands, or help commandname for help on a specific command.
Most likely you will need to expand the file from the CD. The command would be expand d:\i386\hal.dl_ c:\windows\system32\hal.dll. Substitute d: for the drive letter of your CD. Once you have expanded the file type "exit" to exit the Recovery Console and restart the computer.
Flyingember's suggestion is a good one, it would take longer, but if the repair console doesn't work for some reason, that is the next best solution. Here is a how to on the repair install http://www.webtree.ca/windowsxp/repair_xp.htm