I take it that you are the only username on the system/full admin rights ?
You may like to try the following as it relates to your 1st point which may be the best way to go.
I would follow as laid down by M/S.
Error Message: "Windows Cannot Load the Locally Stored Profile" (812339)
When you log on to Windows XP, it may take longer than you expect. When you use CTRL-ALT-DELETE to log out, you may receive the following error message:
Windows cannot load the locally stored profile: Insufficient security rights or a corrupted local file. Windows has logged you in with a temporary profile any setting you make will not be saved.
This problem may occur if the directory that is associated with the account has been deleted from the Documents and Settings folder.
Create a New User Account
To create a new user account, follow these steps:
Start the computer in Safe Mode, and then restart the computer.
After the Power On Self Test (POST), press the F8 key.
On the Windows Advanced Options menu, use the ARROW keys to select Safe Mode, and then press ENTER.
When you are prompted to select the operating system to start, select Windows XP <edition>, where <edition> is the edition of Windows XP that you have installed, and then press ENTER.
Log on as Administrator.
On the "To begin, click your user name" screen, click Administrator.
Type the administrator password,?????? and then press ENTER. In some cases, the Administrator password may be set to a blank password. In this case, do not type a password before you press ENTER.
In Control Panel, click User Accounts.
Create a new user account. Windows makes a new directory for the account in the Documents and Settings folder.
Quit the User Accounts tool, and then restart the computer.