Please forgive me if this has been discussed elsewhere, but I could not find it during a search.

I run XP Home Edition SP3 on a Dell Inspiron 9300 with a WD MyBook 250GB backup/storage. I am a musician, so I need space. Also, because of the nature of my computing needs, I frequently defrag.

My challenge seems to be multifaceted. A couple weeks ago I received an error message

16 bit MS-DOS subsystem
C;\Windows\instal~1\...
The NTVDM CPU has encountered an illegal instruction.
CS:0e23 IP:001d OP: ff ff ff ff ff choose"close" to terminate the application.
with the options "close" and "ignore"

At first I closed it and didn't think anything of it...that is until I had to reboot my computer due to a Windows update. After attempting to reboot to my surprise, I received an error message that looked like this:

Windows could not start because the following file is missing or corrupt:
<Windows root>\system32\hal.dll
Please reinstall a copy of the above file.

When I attempted to escape and F2 so I could view the boot order, I received a second error message

boot.ini file is missing...yada yada yada

So, I F2'd again, reset my boot order, slipped in my OS CD, and ran Recovery Console to reinstall the boot.ini file. This seemed to have fixed the problem, but I was wrong. Out of curiosity I rebooted my computer just to see if it was fixed, but it wasn't. I received the same error message. So, I reinstalled my boot.ini file again. About 10 minutes later the NTVDM error message showed up again. This time I hit ignore until it disappeared. Again, out of curiosity I rebooted and got the same thing. I reinstalled the boot.ini and have been looking for answers to this issue for a few days now.

To top off this string of events, I went to retrieve a sound file from my WD external and saw that the drive letter did not show up in "My Computer." So, I went into Disk Management to see if was there and it was. However, the drive showed as "unallocated." 

I could be mistaken, but something along the way got corrupted and started a snowball effect basically causing me to lose 190GB of sound files and backed up data. Could someone please help. I understand that I will probably have to reformat the external, but I need help figuring out how to keep the boot.ini file on the computer as well as how to fix the NTVDM error.

I hope I was detailed enough!