Crash of XP after upgrade from ME and installing SP2 from update

Yesterday I upgraded my Compaq laptop from ME to XP. It upgraded without
problem. Then when I went to the Windows Update page to download software for
installation of SP2, the software downloaded ok but when I shutdown to finish
install it wouldn't restart. I now get the black screen saying that XP didn't
start succefully. It gives me the options of normal or safe mode start. On
Normal start it goes to a blue screen and says it is checking the c drive for
inconsistencies. "Volume serial number OE2A-OAF1, removing trailer folder
entries from\system volume info.....Then it will loop back and restart. If I
try safe mode (from F8 for advanced commands) it goes to command prompt and
spits out
"multi(0)disk(0)rdisk(0)partition(1)Windows\system 32\Drivers\mup.sys" , plus
many other lines like this before leeping back and rebooting and again it
goes.
What can I do about this? My laptop has a lot of important data that I don't
want to lose. Can I restore ME?