I know with Vista, there was an .exe file that if you ran, created a folder with all setup files, in which you could make a bootable .ISO from. I don't know if that is the case with XP though.
To boot into Safe Mode, turn off your PC. Then, turn it on, and repeatedly press F8 on your keyboard until you are greeted with a screen that asks what mode you want to boot in. Select Safe Mode and try to login from there.
Hmm, that's odd. On my Windows 8.1 systems, I haven't noticed this, nor have a I really investigated it. I'm on my W7 system right now, but the next time I boot up my 8.1 system, I'll look and see if I can spot any.
A few options you might try. Can you log into your account in a safe mode? Do you have any recent system restores? If so, restore and see if you can log in normally. If not, you might try something on this page: http://support.microsoft.com/kb/947215
If you go to your Start Menu, right click on Computer, click on properties, and scroll down to the bottom, you'll see a section called "Windows Activation". If it says "Windows is activated' and you have a Genuine Microsoft icon, you are activated and you should have no problems.