Well considering I've seen this happen first hand
yesterday (different PC) I know he wasn't running XP setup
while in Safe Mode. I can't say how his happened but mine
happened when I tried to perform a repair. My guess is
that Windows knew it was having a problem and had set it
to Safe Mode like Win9x used to do if improperly shut down.
I just fixed mine this morning. The problem was it had
it set in the boot.ini and for some reason the F8 options
for Normal weren't removing the line. For some reason it
is using something like /safemode:minimal. Example:
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="Microsoft
Windows XP Professional" /fastdetect /safemode:minimal
All that needs done is to remove the /safemode:minimal
command and reboot and it will continue the setup like it
should. However, the problem exists in that if you are
running NTFS then you may have some problems editing that
file. I haven't tried it from the Console to see if it
could be done but instead used ERD Commander 2002 to edit
the file. And in my case the problem was solved in under
5 minutes and I didn't lose any of the customers data or
software installations or configs.