SOLVED! Everything fixed. After googling for two days, I think that I'm the first one to post a solution for this issue on the entire internet.

Turns out it's just another registry corruption.
Seeing as I didn't have a working CD with recovery console (many enterprise/streamline installs don't have that option) and I don't even have an optical drive, I just brute forced a manual replacement of the registry files through Windows Explorer
1. Boot from another OS on another drive or partition.
2. Turn off simple file sharing, show system and hidden folders.
3. Take full ownership of the System Volume Information folder of the drive that needs to be fixed (ensure that replace owner on subcontainers and objects is checked).*
3. Goto the proper GUID folder (since you are on another WinXP install, it will start making restores for that installation as well on this harddrive, make sure you find the right one). Open the restore folder and enter the snapshot folder and pick one of the RP folders with the desired restore date.
4. Copy the registry_machine_(DEFAULT/SAM/SECURITY/SOFTWARE/SYSTEM) files somewhere else and rename, removing "registry_machine" from each.
5. Move the files into the correct system32/config folder and write over all the existing DEFAULT/SAM/SECURITY/SOFTWARE/SYSTEM registry files.
6. Reboot and boot into the actual OS and it should be as if a system restore had occurred except that no files other than the registry hives have been restored.
7. Retake ownership (or grant them to your system) of the System Volume Information folder and any other folders you had previously taken ownership of while in the secondary OS.
8. Do an actual full system restore just in case.
* If you don't have any system restore backups available there should still be backups of each registry hive inside the system32/config folder as a last case scenario