Could a hardware failure corrupt user profiles?
Yes! and it's an big Oh Chit!!!
Search M$ Support or MDSN KnowledgeBase for 'User Profile Error'
If the suggested Repair install doent fix it, then its...
Delete and Re-create a Profile
If the user profile is damaged, you must delete the profile, and then create a new profile for that user. To this, follow these steps:
1. Using an administrator account, log on to the computer that contains the damaged user profile.
2. In Windows Explorer, locate the drive:\Documents and Settings\user_profile folder, where drive is the drive where Windows is installed and where user_profile is the name of the damaged user profile.
3. Click the folder, and then press DELETE.
4. Click YES, and then log off.
5. Use the account that had the damaged user profile to log on. A new user profile is created for the user.
*** Chit Happens...