That is an extremely odd issue. Try:
going to
http://www.ati.com and downloading new drivers for your videocard.
Make sure your color depth is set to 32 bit
Right click any open spot on the desktop --hit properties then go to the settings tab - make sure color depth is 32 bit - PS performs poorly in 32 bit.
Make sure no firewall is running. I\'ve had some odd issues with firewalls and planeshift, and though I can\'t really tell why the issues were being caused, disabling it (in my case Firestarter) helped alot.
Make sure you don\'t have some weird always on anti-spyware thing running - in fact its best to close everything you can before running PS. Its kind of an intensive app.
Rerun the updater with --auto (also known as fail safe mode)
if you are still having issues, delete the data directory and rerun the updater once again.
if all else fails try creating a new xp user and loggin on as him/her and running PS.