It's no virus, your hard drive in your computer is shot, you'll need to buy another.

Although this is an older thread I'd like pass on my experience; I had recently bought some new components to upgrade my PC (CPU, MoBo, GPU, RAM, HDD), so I thought I'd take the old components and put them in an old case to give myself a decent backup computer.
For reference, the specs of the computer built from the old components:
Athlon FX4000+ CPU (2.4GHz, non-OCd)
Asus A8N32-SLI Deluxe
Seagate 500GB 7,200rpm
Nvidia GeForce 8600GT
PSU is ambiguous, taken from a stripped down Dell pre-made, output is 250w

I transferred all the components fine, but hadn't yet got around to formatting and installing windows on the new HDD. For the time being, I thought it would be best just to use the new HDD with the old components, thinking that I could just wipe/reinstall windows when I was ready. I put xp professional on the HDD (running with the old components still) and it loaded fine. The first time I came to reboot following software installation, however, I would encounter the exact problem described here: the BSoD would flash up for a tiny amount of time and the system would reboot indefinitely.
For a while I thought it was the PSU, as the one I was using was slightly less powerful than my newer unit. In the end I disconnected everything non-essential (removing my USB mouse, USB wireless adapter and a stick of RAM, leaving the CPU, GPU, DVD Drive, one stick of RAM, HDD and PS/2 Keyboard attached) and attempted to reboot.
The system booted fine in this configuration, I could start Windows normally or from last known good configuration etc.
So, I set about trying to reconnect the components I required. First, the USB mouse; no luck, system flashed BSoD as before then entered a loop cycle.
Next, the extra stick of RAM. This allowed the system to boot just fine. At this point I attempted to connect the USB mouse once windows had booted, this worked fine as well, as long as I didn't restart the machine. At this point I also plugged in the USB adapter once Windows had booted, and got that to work as well. At this point I chose to update / install the drivers for my graphics card, chipset, etc.
At this point I wanted to try to reboot with just the Wireless adapter plugged in, but accidentally left the mouse plugged in instead. Windows booted normally, without hitting the BSoD sequence. So as a final check, I plugged everything back into the computer and hit restart. No luck with this, it entered the loop again. Curious as to whether the order of the USB ports had anything to do with this, I tried to plug the USB devices into different ports. This produced no joy either.
As my computer currently stands, I can boot with all internal hardware connected and a single USB device, and the system will start up perfectly. As soon as I attempt to boot with multiple USB devices, however, I enter the same cycle of BSoD.
At the moment, I can live with having to plug my mouse in whenever I start the computer, but I feel that it will get irritating after a while. Just my thoughts.