============================
Maybe it would be worth a try to do a
System Restore to a time before the
problem began.

(306084) HOW TO: Restore the Operating
System to a Previous State in Windows XP
http://support.microsoft.com/?kbid=306084

Some users have reported problems
after installing IE7. If this applies to your
situation ...uninstalling IE7 may be worth
a try.

(927177) How to uninstall Internet Explorer 7
http://support.microsoft.com/kb/927177/en-us

I've also seen a report that disabling the
ffdshow codec could be the fix. To accomplish
this...open Movie Maker and go to...Tools /
Options / Compatibility tab...Uncheck...
ffdshow / OK.

===
You can disable ffdshow by going to...Start / Run
and enter the following command::

regsvr32.exe /u "C:\Program Files\ffdshow\ffdshow.ax"

After running that command, the regular
DivX/XviD codecs will be used instead of ffdshow.
You can enable ffdshow again with this command:

regsvr32.exe "C:\Program Files\ffdshow\ffdshow.ax"

===

More info:

Movie Maker 2 Crashes and Hangs
http://tinyurl.com/bqgyx
  or...
http://www.papajohn.org/MM2-Issues-Acceleration-and-Codecs.html

Movie Maker always has to close
http://tinyurl.com/fw76b
  or...
http://groups.google.com/group/microsoft.public.windowsxp.moviemaker/msg/ae88267
a9e023836