Tip #1: Avoid Western Digital 🙂
Tip #2: Avoid Maxtor too. They got bought out from Seagate a few months back, and they’re firing nearly everyone from Maxtor and keeping all the Seagate employees, so don’t expect much support from the company.

Tip #3: Googling some more about “C:WINDOWSSYSTEM32CONFIGSYSTEM” brought up a few more possible things to do. Have you tried running “chkdsk /r” from the console? There’s also some other locations to get an older copy of the system file to overwrite it. See for instructions on copying a repair “system” file from C:WINDOWSREPAIR.

Be warned that any of these “overwrite the system file” stuff is actually overwriting the windows registry, so it is likely you may lose any settings for programs that were stored in the registry. Hopefully though it’ll be enough to recover your files. Worst come to worst, you can move the HD to another computer and recover the files that way.

Some of the sites I read suggest that this can be caused not just by a bad HD but also by bad RAM or even a bad HD cable. Anything that can cause corrupt data to be written to disk would do it. If you have a chance, check that your RAM is good.