My guess is you had a virus.
I recently had to rebuild a machine that had a virus that exhibited the same systems. Re-installing windows just allowed windows to get the the wallpaper. As soon as the explorer.exe process started it crashed. I eventually blew out the registry files and/or the windows directory and then re-installed windows (I can't remember which but I think it was just the registry files - it was almost equivalent to a fresh install). This fixed the problem, but the computer was still infected. It took me many hours to clean that machine. Every file and its mother was infected.
So I would suggest:
1: backup your important files to floppies or zip or something available at the command prompt.
2: scan the drive in question for viruses. If you are using a boot scanner, Please make sure you boot scanner isn't a crappy version with old dats (can you say mcafee). I think norton's works.
This might save you having to do a clean install and lose all you program installation and configuration data. Then again you might not have a virus.
To answer your second question, I don't think there will be any problem marking the other partition active (aside from it being confused about drive letters maybe).
Also I've had luck recently with housecall.antivirus.com.
It was able to run when other AV's were impeded by the virus.
I hate viruses - they are a tremendous waste of my time.