Win XP crashed after system restore

I had the system working perfectly until I install a Visual Magic application for Insurance Agent.

After the installation on restarting the computer The Cd-Rom drive was not comming into detection.

So I choose to restore the system using the System Restore.

The computer is not coming up as it ask for a cd to replace file

windows/System32/Config

Please advice what is going on.

Do I need to format the drive else as on putting the cd is also not helping as the system files are corrupted and gives me a error cannot replace the files.

And gives Access Violation error.

Please advice as soon a possible.

As I am about to loose the data which I have on the Hard disk?