How does diabling DEP (Data Execution Prevention) affect system Security

By turning DEP off, you removed the protection.

Whether you had any further anti-virus protection or not, your level of protection would have become diminished by your actions.

This may explain why your system now is experiencing difficulties.

How exactly did you manage to turn DEP off, and why did you disable it if you didn't know what it was? ;)

Further reading:
http://support.microsoft.com/kb/875352

Data Execution Prevention (DEP) is a security feature included in modern Microsoft Windows operating systems that is intended to prevent an application or service from executing code from a non-executable memory region. This helps prevent certain exploits that store code via a buffer overflow, for example. DEP runs in two modes: hardware-enforced DEP for CPUs that can mark memory pages as nonexecutable, and software-enforced DEP with a limited prevention for CPUs that do not have hardware support. Software-enforced DEP does not protect from execution of code in data pages, but instead from another type of attack (SEH overwrite).

DEP was introduced in Windows XP Service Pack 2 and is included in Windows XP Tablet PC Edition 2005, Windows Server 2003 Service Pack 1 and later, Windows Vista, and Windows Server 2008.

Please post back if you have any more problems or questions.
If this information is useful, please mark as helpful. Thanks.

DEP is turned off by default on our XP images, so they will run fine with or without it enabled.

You have other issues. If you need we can help you with what has really caused your crash. Give us some history of what else you have recently done to this PC.