Spooler Subsystem App Error, Can't Fix

I am trying to resolve an error that occurs when 2 clients running xp pro restarts, after logging in, gets an error stating "the spooler subsystem app has encountered an problem and needs to close". I found the MS knowledge base article addressing this error but the resolution didn't fix the error and it is the only article I can find addressing it. The article addresses the symptoms completely too. The KB article is 810894. I am trying to install a HP 1300 usb/parallel printer to the machine via the usb port and I am following HP's support document on "uninstalling and reinstalling the LaserJet 1300 for windows xp on a USB port" so I know I'm doing the installation more correctly than I ever would normally, lol, and at the end of the add a printer wizard I get the error of "Operation cannot be completed". I have not been able to find any other resources on resolving this issue. I completely ripped out the 1300 driver, software, using the hp doc, and checked the spool dir and registry keys according the the KB article, reinstalled the 1300 first time with the error, tried again and got to the finish of the wizard and that it installed correctly, had to restart, desktop takes forever to load now, and still have the same spooler subsystem app error msg after login and the printer isn't there in the printers and faxes window. Tried a repair on win xp on 1 client. Reinstalling windows doesn't solve this issue either. Both clients were just upgraded to xp pro from 98. Looks like I have to format if there isn't anyone out there that can help. Thanks in advanced.