The first thing you should do is move the drive into an external enclosure, not internal so there is no chance of booting from it, and backup everything you care about.
A quick search doesn't show that this issue is known to be related to SP3, so we'll assume its unrelated to what you were doing.
It is very likely this is physical HDD damage. If the machine is >3 or 4 years old this is not uncommon.
The easiest way to rule out this option is to run a HDD diagnotic tool. I use
SeaTools which is free from Seagate, but works on almost any drive. There is a Windows version if you move the drive to another machine, and there is a bootable DOS version which can be run from a CD or floppy. You should run this to determine if the drive if physically healthy.
From SeaTools you should run the following tests (Depending on the size of the drive this could take over a hour.)
Run the short test, if that fails buy a new drive. If the itsucceeds then run the long test.
If the long test fails buy a new drive.
If the long test succeeds after repair run the test again, if it finds more errors buy a new drive.
If the long test succeeds you can be fairly sure its a software issue.
If this is a software issue you may be able to recover your machine, but you probably won't be able to get the machine very stable. My recommendation is run fixmbr from recovery console, delete ALL partitions on the drive, recreate and format any partitions, then reinstall Windows. However if you don't want to do that there are two things you can try.
Either of these options may cause data loss/corruption, so make sure you've backup up your data!
1. It could just be a MBR corruption issue, this could be due to a virus, HDD damage, or something else. Assuming the HDD is still functional this can be corrected from Recovery Console if you can get it to load, by using the fixmbr command.
2. You can try doing an over-the-top installation of XP. This would replace the system file with original ones. This could save files, but application installs and system configuration would be lost.