Old-ish destop's Windows XP operating system gone caput. What to do?

[JumpingJellyfish]

I have a Dell desktop that is 6.5 yrs old (bought directly from Dell). All was ok until it decided that there's a corrupt Windows system file and won't boot up Windows (XP Professional). I tried the Windows recovery disk to no avail, so got on the blower to Dell who ran diagnostics and confirmed it's not a hardware problem but an operating system problem. They then kindly advised that the cost of repair could be near £200 (!!!!) so how about a new computer instead???!
I admit ours is old and slow, but I don't use it for work anymore (have a work laptop) and it's used principally for accounts and for DS to do wordshark (dyslexic game) and occassional internet kids games (e.g. Cbeebies). I had not envisaged forking out lots of cash for a new one.
I need to get photos off the hard drive but otherwise there is no urgent hurry to get it working so I want to think hard about whether to repair or replace. Kids could do with a family desktop (I like it in the room I can watch them in, especially to make sure DS is doing the right word lists etc!!) but doesn't need to be v high spec.

Anyone in the know who could offer advice? I was about to call up our local computer repair place but just don't want to shell out any cash unless necessary (having already paid Dell £29 for the diagnostic, grr). Thank you!

[ladyWordy]

If you've still got all your Dell Recovery disks you can reinstall your XP operating system from scratch. So no problem there...

But - you would want to get your files off there first. That's fiddly but probably doable.
You need to burn a live CD like this one
www.paragon-software.com/home/rk-express/

• and use it to extract the files to a memory stick or other media. This is assuming your XP machine has a functioning CD drive.
  

As stated, it is fiddly but only costs the price of a CD?

[ArtfulAardvark]

Are you SURE you do not have a virus on this machine?

I wish I could help but you are about to learn the same lesson as me - anything important should be kept in more than one place. I have photos now that my only copy had to be recovered from facebook. Now I double disk and copies of my ongoing accounts are emailed to my yahoo account.

[PedroPonyLikesCrisps]

If you decide to replace the PC you can always pull the hard disk out of the old one and plug it into the new one to recover your files. You can either put it directly inside the new PC if there's a spare slot or you can buy a case to house and power the disk so you can plug it in via USB.