Apparently your XP is missing some needed component to complete the task you are trying to perform. When and in what context does this message appear, as that will give a clue as to the missing component(s).
I notice that you do not have the Windows XP style selected as your taskbar is grey, not blue. Was it always this way or did it change by itself. If it just changed one day, it could be a sign of hard drive corruption (where it cannot access the XP theme) or virus infection (where a virus deliberately disables various system functions to prevent you from using the machine).
Did you have a recent virus infection that was cleaned up? The anti-virus program may have removed some Windows files where the virus(es) attached themselves.
Start with the simple. Go to My Computer, right click on your hard drive, select Properties at the bottom, go to the second tab Tools and run a disk error check. Check the boxes for Automatically fix system error and Scan for bad blocks. You will have to reboot and be patient as this can take a while depending on the size of the drive. The computer will continue to the desktop when the disk check is complete. Listen for and ticking, knocking or attempts to keep reading disk sectors as this may be a sign of a failing drive.
After, download and run at least one antivirus scan. I can see you have CCleaner and uTorrent but I do not see any antivirus. If you have SP2 or SP3, install Windows Defender from Microsoft first. It is self explanatory, free and available here:)
Note you must be running a legal copy of Windows XP for this to install.
The other antivirus I would suggest is AVG Free Edition, which is available from here:)
My final suggestion is to run a System File Check, but you need a Windows XP installation disk for that. The Compaq Restore CDs will not suffice as they are generally compressed and encoded.
Please post comments on your progress and results.