There's something wrong there as that should only pop up if you are properly shutting the pc down - ie crash - or there is something wrong with the registry. Better check that all the drivers are installed properly or you haven't removed something from xp during the 'hiding' process.
Found this
here The "Last Known Good" configuration is one of the available startup options in Windows NT 4.0, Windows 2000, Windows XP and Windows Server 2003. It starts the computer by using the registry information and drivers that Windows saved at the last shutdown. Any changes made since the last successful startup will be lost.
The Last Known Good Configuration startup option allows you to recover from a problem by reversing driver and registry changes made since you last started Windows XP/2000/2003. Windows does not update Last Known Good Configuration information in the registry until the operating system successfully restarts in normal mode and a user logs on and is authenticated.