Maybe we can consolidate know facts about your system...Let us know what is incorrect...
The computer will start and run normally if you do not boot into Windows...even safe mode.
When you boot into the Windows RE, the files seem to expand, but halt prior to completing.
Might be a memory problem where the files are not being expanded into the RAM Disk or
Maybe the hard drive will not allow access. (I don't suppose you have changed the drive controller)
It never gets to a normal Windows GUI without shutting down or rebooting...Possibly a video problem.
The one time I got into a repair loop was when I had loaded some Bluetooth drivers. I could not get out, but I could boot to the Windows RE and use the Command Prompt to remove the bad driver. I will give you a link that goes through several scenarios, but booting into the RE is pretty much required.
So, can you turn off any devices in the bios, such as an on board network adapter, or Bluetooth or sound?
Do you have another hard drive you can try? Disconnect the other one completely.
Along this same line, when the system boots initially, does it hang on the bios screen for a long period of time?
There is always a chance something on the Motherboard has failed. It might be something that only shows up in certain circumstances.
After you install a device or update a driver for a device, Windows Vista or Windows 7 may not start