Try disconnecting both ide and power cable from the drive, if it boots up then its the drive...simply return for a new one. If it still does the same and system restore doesn't work try booting to safe mode click start...run...type in scanreg /restore and see if that works for ya.
P.S.
I have seen it where drives will not allow a computer to boot into windows but will let the computer boot into safe mode. Also try setting your video to vga if after doing the top doesn't work. Just go to msconfig...click advanced and then click on the one that has vga 640x480x16, reboot and see if you get into windows. It could just be a corrupted driver!
